Tesco defers expansion plans despite 5% profit rise

TESCO is putting expansion plans in Ireland on hold for a year despite a 5% increase in sales to a record high of e3 billion last year.

A drop in sales of alcohol and household products however, meant like-for-like sales, when its 16 new stores are stripped out, fell 4.2% in the year to the end of February 2009.

Tesco Ireland’s chief executive Tony Keohane said the company is taking a cautious look at new developments adding that any development plans are being pushed back a year.

“It has proved to be a challenging year both for us and our customers, as the economic contraction has affected customer confidence and spending, particularly in the final quarter of the year.

“We have been adapting our prices and our product range to reflect changing customer shopping patterns and these have helped the affordability of shopping in our stores,” said Mr Keohane.

Clothing sales were up 45% in the year while meat, fish and bakery also recorded good growth. Demand for alcoholic drinks, household products and flowers fell.

The cashsavers range of 1,500 products introduced during the year accounted for 7.5% of sales, while the online service grew by 35%.

Tesco set a new record for a British retailer yesterday when its annual profits broke through the £3 billion (e3.4bn) barrier. Tesco does not give profit figures for Ireland.

It also revealed worldwide sales hit more than £1bn (e1.1bn) a week for the first time.

Retail experts described the performance as “resilient” amid the recession and a slump in consumer confidence.

Tesco’s non-food sales suffered in particular as the recession tightened its grip, with clothing sales down 2% and total British growth nearly half the level seen the previous year.

Head of equities at Hargreaves Lansdown Stockbrokers, Richard Hunter said: “Some of Tesco’s UK supremacy has undoubtedly been eroded by rivals playing the value card, but few of those competitors have the diversified business mix which leaves the company well placed.

“While the company is not immune from the wider economic environment, these results have shown a resilience which should remind investors of Tesco’s innate strength,” he added.

Tesco said it was reducing prices where possible to help customers, but cautioned the weak pound was likely to push some prices up as it hits import costs.

Terry Leahy, chief executive of Tesco, said: “At a time when customers everywhere are feeling the economic strain, we are responding to their changing needs in all our markets by lowering prices, introducing more affordable products and offering even sharper promotions.”

Tesco has 116 stores in Ireland and 15 petrol stations. In Britain it has 2,280 stores and another 2,000 internationally. It employs 469,000 staff.