Tesco has called a halt to the relentless expansion of its Irish store network as it battles in a “difficult” market to regain growth after 10 successive quarterly declines in like-for- like sales.
The chain’s parent capped a turbulent period by disclosing a £6.4 billion (€8.9 billion) loss in the year to February as big property writedowns followed a sharp decline in trading profits and an accounting scandal.
Annual sales in the Irish business dropped to €2.56 billion from €2.69 billion in the previous financial year when VAT was excluded.
“Our performance in the period is reflective of a highly competitive and challenging retail market,” said Andrew Yaxley, chief of Tesco Ireland.
Closures
The chain closed two Dublin outlets last year, a supermarket at Ballymun and an “express” store at Mulhuddart, but said it had “no specific plans for any further closures”. The opening of five new Irish stores meant the chain finished the financial year with 149 outlets in the State and almost 15,000 staff.
After the parent shelved 49 development projects, the spokeswoman for the Irish business made it clear that further openings are not scheduled.
“We don’t have immediate plans to open new stores. However, we do have an active property agenda that is kept under review,” she said.
The stores opened in the last fiscal year are the Tesco Park Pointe Superstore, Dublin; Tesco Extra Dundalk, Co Louth; Tesco Ballincollig Superstore, Co Cork; Tesco Express, Aungier Street, Dublin; and Tesco Express at Pearse Street, Dublin, which opened in February.
In its results presentation yesterday, the parent said: “We have seen strong competition from discount retailers and this held back our sales performance, particularly in Ireland, which saw a like-for-like sales decline of 6.3 per cent.”
At constant exchange rates, the Irish sales figure, including VAT, was down 5 per cent on the previous fiscal year when including the sales contribution from new stores. When exchange rate changes were applied in the conversion of Irish revenues to sterling, sales including VAT were down 10.8 per cent year-on-year.
Asked if Tesco Ireland was undertaking any strategic change to stop the decline in sales, the spokeswoman said Tesco’s new chief executive Dave Lewis “has been very clear on the strategy at group level and we are focused on delivering our local business plans focusing improving value and quality for our customers”.
Mr Lewis was recruited from Unilever last summer after Tesco sacked company veteran Philip Clarke as chief executive. Soon afterwards, the disclosure of a £263 million profit overstatement, under investigation by Britain’s serious fraud office, precipitated the exit of Tesco chairman Sir Richard Broadbent.
Property writedown
The parent’s results were made worse by a £4.7 billion property writedown, but Tesco Ireland’s spokeswoman would not say whether this included any Irish impairments.
“The figures in the group release are reflective of the group-wide position. We don’t disclose specifics at individual country level,” she said.
Tesco Ireland said its focus was on improving the core offering to customers in “in the context of a difficult trading market”.
Mr Yaxley said the business was making “long-term investments in the things that matter most to customers: reducing prices on everyday items, enhancing the quality of our fresh food offering and improving service.”
He insisted the business saw “early indications that we are moving in the right direction with an uplift in customer loyalty and fresh produce volumes, which are important positive indicators of growing customer confidence”.d
