Tesco’s Irish sales decline in first half of year to €1.45bn

Tesco’s sales in the Republic in the first half of its financial year declined by about 2 per cent to €1.45 billion when compared with the same period of 2020, the British grocery chain revealed on Wednesday.

Tesco said its sales declined in the first quarter, reflecting the impact of stockpiling in the prior year which was "particularly marked due to earlier and stricter lockdown restrictions than in the UK".

In the second quarter, annual like-for-like sales grew, benefiting from a strong clothing performance and seasonal events such as back to school, gardening and Father’s Day.

Its online business achieved growth of 10.8 per cent year-on-year and now represent 8 per cent of total Irish sales, Tesco said.

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Tesco had 151 stores in the Republic at the end of August, with just more than 3.3 million sq ft of retail space. Commenting on the Tesco Ireland results, chief executive officer Kari Daniels said: "I am very pleased with the performance of the business despite the ongoing challenges posed by Covid-19."

At a group level Tesco, the UK’s biggest retailer, raised its full-year outlook as it reported a 16.6 per cent rise in first-half core retail profit and increased sales despite labour and supply chain disruption and tough Covid-19 related comparisons a year ago.

The group said on Wednesday its strong first-half performance to the end of August had enabled it to reduce net debt by £1.7 billion (€2 billion) since February, and it would therefore use cash for a share buyback, with the first tranche of £500 million in shares to be bought by October 2022.

Tesco forecast a full-year 2021-22 adjusted retail operating profit of £2.5 billion-£2.6 billion, having previously forecast a similar outcome to 2019-20, when it made £2.3 billion.

Tesco, which has a 27 per cent share of Britain’s grocery market, made adjusted retail operating profit of £1.386 billion in the first half – ahead of analysts’ average forecast. First-half group sales rose 2.6 per cent to £27.3 billion, while UK like-for-like sales rose 1.2 per cent, having risen 0.5 per cent in the first quarter.

The company said two-year like-for-like sales in the UK and the Republic of Ireland increased by 9.1 per cent with all areas “making a strong contribution”.

‘Strong six months’

It said adjusted operating profit in both jurisdictions was £1.3 billion, up 16.5 per cent at constant rates due to higher sales and lower Covid-19 costs .

"We've had a strong six months; sales and profit have grown ahead of expectations, and we've outperformed the market," said chief executive Ken Murphy. "With various different challenges currently affecting the industry, the resilience of our supply chain and the depth of our supplier partnerships has once again been shown to be a key asset," he said.

Analysts say Tesco is benefiting from its huge online business, from a pricing strategy that matches the prices of German-owned discounter Aldi on about 650 products and the success of its Clubcard Prices loyalty scheme which offers lower prices to members.

However, Tesco chairman John Allan told ITV last month that supply chain disruption meant food prices could rise by 5 per cent this winter. Tesco's share price has risen about 10 per cent so far this year but has underperformed both Sainsbury's and Morrisons .

Morrisons, which is being taken over by US private equity group Clayton, Dubilier & Rice, is up 60 per cent, while Sainsbury's, also buoyed by takeover speculation, is up nearly 33 per cent. Tesco is also paying an interim dividend of 3.2 pence, in line with the prior year. – Additional reporting by Reuters