Tesco raised its annual profit forecast on Thursday as the supermarket group won market share in its first half, giving it momentum in advance of the key festive trading period.
Its Irish stores saw like-for-like sales rise 4.7 per cent in the first half of the financial year, with total revenue excluding fuel and VAT at €1.7 billion for the six months. The group has a 23.5 market share in the Republic of Ireland, up 88 basis points year on year, and representing 31 consecutive four-week periods of gains in the Irish market.
Tesco said new stores contributed to growth, with the company opening seven additional locations to bring the total in the Republic to 177.
Ongoing investments in product quality and innovation, and store refreshes were also a factor in growth, the retailer said.
Food sales rose 5.4 per cent, while non-food sales fell by 0.8 per cent declined as figures felt the effect of the transition to Tesco’s new partnership with The Entertainer. This was extended to all of Tesco’s UK and Irish stores earlier this year, and means Tesco gets a commission from the sale of toys by The Entertainer. When toy sales were discounted, non-food sales were up 0.6 per cent.
The company has also made further progress in its loyalty card scheme, which provides lower prices for members, with Clubcard sales penetration increasing by 5 percentage points year-on-year to reach 85.3 per cent.
“In the first half of the year we’ve performed strongly as a business, particularly in the fresh food space,” said Geoff Byrne, Tesco Ireland interim chief executive.
“We continued to invest in product quality and innovation and remain focussed on providing value for our customers. We’ve gained and retained customers in the half, which is reflected in our market share performance. The seven new stores opened in this half are all contributing to our growth.”
In the UK, sales were up 4 per cent overall, driven by investment in its products and the Finest range, which continued to grow in popularity, notching up a 14 per cent rise in sales volumes over the period.
The group said it now expected overall retail adjusted operating profit, its preferred profit measure, of “around” £2.9 billion (€3.5 billion) for its 2024/25 year, up from a previous forecast of “at least” £2.8 billion. It made £2.76 billion in 2023/24.
Tesco, whose shares have risen 22 per cent so far this year, is continuing to benefit from its strategy of matching the prices of discounter Aldi on hundreds of key items, and the popularity of its Clubcard scheme. These programmes are being financed by taking costs out of the business.
For the first half, Tesco’s retail adjusted operating profit was £1.56 billion, up 10% on a constant currency basis.
In the UK, Tesco’s market share rose 60 basis points to 27.8 per cent in the 12 weeks to September 1st year-on-year, its highest level since January 2022, according to researcher Kantar.
“Our strong UK and ROI (Ireland) market share gains across the last year demonstrate our continued momentum,” CEO Ken Murphy said.
“We are in good shape, with volume growth delivering strong financial performance.” – Additional reporting: Reuters
