Tesco’s Irish sales growth buoyant on the back of lower prices

Competitive pricing in the Republic of Ireland has helped Tesco grew like-for-like sales in the region by 3 per cent in the first quarter, the company said on Friday.

Growth in the State was particularly strong, outperforming the UK market, with the 3 per cent growth considerably higher than the 0.2 per cent figure recorded in the first quarter of 2017.

The company achieved this result “as customers continued to react positively to our more competitive price position, despite us experiencing store closures across our entire estate for one day, as a result of adverse weather conditions in early March”, Tesco stated in a stock market update.

Commenting on Tesco Ireland’s results, Andrew Yaxley, chief executive of the Irish unit, said: “Our like-for-like sales have increased by 3 per cent, volumes are up and customers are putting more items in their basket. Our sustained investment in price has also led to further declines in our average selling price, particularly due to our investment in the 800 lines that matter most to customers.”

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Across the company it said the drive to reduce prices for customers had boosted quarterly sales, in an ominous warning for rivals three years after the biggest retailer in both the Republic of Ireland and Britain embarked on a turnaround programme.

Tesco, which was forced to rebuild after a 2014 accounting scandal capped a downturn in trading, said a move to lower prices on fresh food brands towards the end of its first quarter reflected a growing confidence in its performance.

The lower prices, plus a relaunch of its own-brand products, helped the group to counter adverse weather and post first-quarter underlying sales in its home market up 2.1 per cent, in line with forecasts.

"Our growth plans are on track and we are pleased with the momentum in the business," Tesco chief executive Dave Lewis said. "We remain well-placed to serve our customers better and deliver on our medium-term financial ambitions."

Online sales

The lower prices are likely to be welcomed by customers in Britain where a string of retailers have struggled in a tough market. Britain's supermarket sector has been upended in recent years by the rapid growth of discount groups Aldi and Lidl and the growing popularity of online sales, forcing traditional groups Tesco, Sainsbury's, Walmart's Asda and Morrisons to work harder.

As part of Tesco’s recovery it has bought wholesaler Booker for £4 billion (€4.57 billion) to expand into supplying restaurants, cafes and local shops. Now it is having to confront the prospect of a larger competitor after Sainsbury’s announced a deal to buy Asda.

Tesco currently dominates Britain’s supermarket sector by a clear margin, with a 27.7 per cent market share, according to industry data. However, the proposed Sainsbury’s takeover of Walmart’s Asda for £7.3 billion would push Tesco down into second place, posing a serious threat to the group.

Tesco added that its growth plans were on track and it was delighted with initial progress at Booker, which posted a rise in like-for-like sales of 14.3 per cent, including tobacco. As a group, it posted underlying growth of 1.8 per cent, its strongest performance since 2011. – Reuters