Tesco Ireland said full-year sales volume grew 15 per cent as price reductions boosted transaction numbers and lured shoppers away from Northern Ireland.
The company said sales fell 7.5 per cent in value to €2.9 billion in the year to February 27th, 2010, and trading at the 11 Tesco stores in border areas rose by an average of 33 per cent year on year.
"The past year has proved extremely challenging for customers, as the economic position has affected incomes, job security, confidence and consumer spending. We, like other businesses, have had to respond to these difficulties and adapt our operations and strategy to meet the changed circumstances of our customers," said Tesco Ireland chief executive Tony Keohane.
"Customer response to the programme has been extremely positive with footfall or transactions increasing by almost 10 per cent by the year end. The scale of the price reductions, however, means that while volumes have increased, customers are spending less and are now saving around 11 per cent on their weekly shop compared to a year ago."
Demand for Irish products is high, the retailer said, and the sales of own brand products have risen to 35 per cent of total sales.
"The market has steadied but uncertainty around consumer confidence and spending persists. Trading continues to be intensely competitive," said Mr Keohane.
Publishing its group results, Tesco said the global economic recovery has taken hold and it sees little risk of a dip back into recession in its main British market despite a slowdown in recent sales growth.
The group, which runs over 4,300 stores across 14 countries, met forecasts today with an 8.7 per cent rise in annual profit, boosted by acquisitions in Asia and financial services, and said it is stepping up expansion plans in the year ahead.
Capital spending will rise to £3.5 billion from £3.1 billion in the year just ended, with the group creating about 16,000 jobs and opening around 11 million square feet of new selling space, up from 7.1 million in 2009-10.
About 80 per cent of this will be abroad, much of it in Asia.
"The recovery has taken hold - strongly on a worldwide basis, which is good for Tesco, and slower but steady in the UK. There won't be a double dip (recession)," chief executive Terry Leahy told Reuters in an interview.
Profit before tax and one-off items was £3.4 billion in the year ended February 27th, helped by the first full-year contributions from the group's purchase of the Homever chain in South Korea and full ownership of Tesco Bank.
That figure was up 10.1 per cent versus the previous 52 weeks and 8.7 per cent on a 53-week basis, and just above analysts' average forecast of £3.38 billion in a Reuters poll.
But earnings were boosted by £377 million of profits from property deals, which some analysts said was higher than they had expected.
Others also noted a sharp slowdown in UK sales growth towards the end of the financial year and that the group did not give figures for recent weeks, as it did last year.
"A decent outcome (but with) caveats," said Arden Partners analyst Nick Bubb of the results.
At 0806 GMT, Tesco shares were down 0.6 per cent at 434.75 pence, compared with a flat STOXX 600 European retail index.
Tesco, which makes about 70 per cent of its profits in Britain, said sales at UK stores open at least one year rose 2.7 per cent excluding fuel and VAT sales tax in its fiscal second half, down from 3.7 per cent in the first half.
JP Morgan Cazenove analysts said this implied growth of 0.6 per cent in the final seven weeks, after a strong Christmas.
esco said underlying sales overseas were turning positive and losses in its recession-hit US business had peaked, although it was still unable to say when it might break even.
The group cut net debt to £7.9 billion, ahead of an expected decline to about £8.5 billion, and lifted the full-year dividend 9.1 per cent to 13.05 pence a share.
Mr Leahy said Tesco had not suffered much from the recent disruption to international air travel, as less than 1 per cent of its products were brought in by air. The group was arranging to pick up flowers from Kenya in Spain, he said.
Additional reporting: Reuters
