Tesco Ireland sales drop 3%, as new taxes curb spending

Local Property Tax and continued austerity blamed for fall in revenue



6 June 2013

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Tesco Ireland saw sales slip by 3% on a like-for-like basis in the first quarter of 2013, on the back of increased austerity measures. That compared to an average 5.5% like-for-like decline across its European operations outside the UK. In a statement the retailer said: "In all markets, consumers continue to exercise caution in their shopping habits, as they face the direct impact of a variety of austerity measures linked to the tough economic environment. The impact of these external pressures increased in Ireland, with a significant reduction in consumer sentiment and spending following the announced introduction of a Local Property Tax on residential properties".

Group sales for the 13 weeks ending 25 May 2013 increased by 1.8%, including petrol. In the UK, the retail giant also failed to sustain a domestic sales revival in the first quarter as discounters and upscale rivals continued to gain momentum. Same-store stores fell by 1%, excluding gasoline and value-added-tax, compared with the previous quarter’s 0.5% gain.

But while austerity measures are hitting the retailer, more intense competition from German discounters Aldi and Lidl are also affecting its sales in Ireland. The most recent retail data for the grocery sector from Kantar showed that Tesco’s lead in the near €10 billion a year Irish grocery market is slipping. Its market share fell to 27.6% from 28.4% in the 12 weeks to 12 May. Aldi and Lidl boosted their combined share to 13.6% from 11.6%.

While Tesco’s performance in every food category was stronger in the first quarter than in the last two months of the prior year, frozen foods and chilled convenience meals were the exception, although the retailer noted that the performance of these two categories has also picked up in recent weeks. "Since January this year we have completed nearly 1,500 tests on our own-brand meat ranges, which identified four frozen beef products contaminated by equine DNA. The four products were withdrawn, reformulated and reintroduced, with new suppliers. We have also accelerated our work with all of our suppliers to ensure that our market-leading technical processes and specifications can enable customers to place a renewed level of trust in our entire product range," the retailer said.

Last week, Tesco announced that the chief executive of its Irish arm, Tony Keohane, is stepping down from the role. He’s being succeeded by Philip J Clarke – no relation to the group CEO. Keohane will remain as non-executive chairman of the Irish business.




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