Saturday 18 November 2017

Tesco reports second consecutive drop in full-year profit

Irish like-for-like sales down 5.5pc as Aldi and Lidl fight with lower prices

Tesco has reported disappointing results
Tesco has reported disappointing results

RETAILER Tesco has reported its second consecutive drop in full-year profit as it continues to struggle both home and abroad.

Tesco's trading profits fell to $3.3bn, from £3.45bn a year earlier, while sales were flat at £70.9bn.

"Our results today reflect the challenges we face in a trading environment which is changing more rapidly than ever before," said chief executive Philip Clarke.

Both Tesco's share price and market share are struggling at near-decade lows.

The results reflect a tougher time in the UK grocery sector brought on by the likes of Aldi and Lidl.

Tesco's Irish market share is also suffering as the growth of the German chains cements the view that shopping habits have been permanently altered by the economic meltdown.

Despite signs the economy is emerging from a seven-year recession, Aldi has captured its biggest ever market share here.

The figures from research group Kantar Worldpanel show Aldi had a 7.9pc share of the Irish grocery market in the 12 weeks to March 30, up 21.9pc on the same period last year.

Lidl's share rose 11.1pc to 7.5pc, just off the record 7.7pc it hit back in August as shoppers stocked up before schools re-opened.

While Lidl and Aldi have traditionally been called 'discounters', their expanded ranges of upmarket products – from lobster and guinea fowl to fillet steaks – have solidified their positions as part of the mainstream shopping experience.

Their bigger slice of the market also comes as they continue to open new stores.

Chris Martin, the boss of Cork-based retail group Musgrave, which controls SuperValu, said earlier this year that he and his team no longer even referred to the German rivals as 'discounters' because they were now such an entrenched part of the retail landscape.

"Aldi has maintained a growth rate of over 20pc throughout 2014," according to David Berry, commercial director at Kantar Worldpanel.

"This has boosted its market share from 6.4pc last year to a record 7.9pc. Aldi has capitalised by capturing more spend from its shoppers," he said.

"Each shopping trip has grown by an average €2 per trip with two additional items being added to baskets."

The performance by Aldi and Lidl has also resulted in the decline of Tesco and Dunnes' market shares.

Tesco – the country's top retailer – has seen its pole position eroded over the past year.

It now commands a 26pc share of Ireland's grocery market, 6.6pc lower than it did this time last year.

Since Musgrave rebranded all 24 Superquinn outlets as SuperValu earlier this year, SuperValu has become the country's second biggest grocery retailer.

With a 25.2pc share, it's been closing the gap on Tesco and could topple it by the end of the year.

Mr Berry said the issue at Tesco is that while virtually the same number of shoppers are now passing through its doors as this time last year, each of those shoppers is now buying one item less per trip.

Dunnes Stores saw its share of the market fall 3.9pc to 21.9pc. That's the first time in six months that its market share has fallen below 22pc, while 40,000 fewer shoppers have visited the chain this year.

Grocery inflation stood at 1.9pc for the 12-week period that ended on March 30, up from the 1.7pc recorded at the end of the last period in February.

 

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