Recession sees Tesco adjust stores policy

TESCO said it makes sense to temper its stores policy in Ireland given that the country is facing a big slowdown.

Chief executive Terry Leahy said that despite the fact that Tesco has ambitious growth plans, the company will have to adjust its plans sensibly because Ireland is facing a recession.

“Having said that, we’re still in a very strong position,” he added.

He said the company was putting in place the measures to make sure Tesco grows market share and makes faster progress than anybody else, even though at a slightly lower rate than its original plan, adding that “it’s a sensible adjustment, it doesn’t give up on the strategic opportunity for the future”.

“That is the key thing and it’s what I learned managing Tesco through the last recession in the late 1990s and indeed, in the recession before that. Keep going sensibly through the downturn; it puts you in a very strong position in the upturn,” said Mr Leahy.

A spokesman for Tesco Ireland said he could not elaborate on Mr Leahy’s comments other than to say Tesco Ireland will consider market conditions going forward and adapt accordingly.

Tesco has 113 stores in Ireland with two stores, Bailieborough in Cavan and Donore Road in Drogheda, due to open before Christmas. It also has 14 petrol stations, with one more in Cashel due to open before Christmas.

On a group level Tesco, Britain’s biggest supermarket company, reported third-quarter sales growth that beat analysts’ estimates after introducing a cheaper product range to combat discounters Aldi Group and Lidl.

Sales climbed 2% at British stores open at least a year, excluding petrol.

The addition of a new range of discount goods in September helped attract new customers, though it led to price deflation, finance director said Andrew Higginson.

Tesco’s sales growth was the slowest since the fiscal year that ended in 1993.

“Tesco has defied the laws of gravity, kicking market recessionary fears firmly in the teeth,” Howard Wheeldon, senior strategist at BCG Partners, said in a note. Still, “the need to discount prices heavily may yet bear a burden on profits”.

Tesco also said it plans to reduce capital spending next year to less than £4 billion (€4.7bn) from about £4.5bn in the current fiscal year.