Strong growth in sales is continuing to be achieved by the Tesco food retailing combine through its 76 supermarkets in Ireland. But the growth rate has slackened slightly from the hectic pace established after the £630 million purchase of the Quinnsworth, Stewarts and Crazy Prices businesses from Associated British Foods in 1997.
Interim figures from Tesco indicate that "like-for-like" sales in Ireland increased by six per cent in 24 weeks to August 14th compared with 8.4 per cent sales growth achieved in the 1998-99 full-year period. "The businesses continue to make progress," commented Tesco on the group's Irish outlets.
The financial results of Irish supermarkets are not disclosed in Tesco's interim statement. Rather, the Irish results are included among the group's "Rest of Europe" activities, which exclude the UK, including Northern Ireland. Operating profits of the "Rest of Europe" stores fell £5 million sterling to £10 million (€15.58 million) on turnover up £100 million at £633 million.
The main factor behind the reduced profitability was the cost of opening new hypermarkets in central Europe, Tesco says in its interim statement. In Ireland, the programme of store conversions and re-branding is continuing. "We have now converted 36 stores and expect to have converted 47 by the year-end - and a further 20 stores next year," says Tesco.
"We made an important first move towards improving our supply chain network with the opening of our Tallaght ambient depot last year. Currently, central distribution handles 35 per cent of products, and this will build up to 95 per cent over the next three years, with the addition of a composite fresh food warehouse opening in 2001. This centralisation programme has taken time to gain momentum. "However, the benefits to the stores in terms of availability and the financial returns over the next three years will be substantial, as they were in the UK. Next year, we plan to open four new stores with a number of sites in progress for future years."
Interim results for the Tesco group as a whole exceeded market expectations and confirm its position as the UK's leading food retailer. First-half pre-tax profits rose 8.1 per cent to £401 million sterling on sales up 9.9 per cent at £9.1 billion. Sales in the highly competitive UK market rose 7.3 per cent, partly due to new store openings and store extensions.
Sales through existing stores increased by 4.1 per cent, split between 3.0 per cent volume growth and 1.1 per cent price inflation. Entry into home shopping through the Internet is paying dividends with 80,000 customers using e-commerce services at 50 stores. The service will be available in 100 stores by the end of the year, when annualised turnover is expected to reach £125 million.
First-half earnings per share rose 9.5 per cent to 4.26 pence, providing strong cover for the interim dividend, raised by 7.2 per cent to 1.34p per share. On a day of widespread weakness on the UK stock market, Tesco shares firmed one penny to 184p.
