Tesco’s Irish sales fall 3%

Tesco sales in Ireland fell by 3% in the first quarter of 2013 as the impact of the horsemeat scandal hit one of Europe’s largest supermarket chains.

In its quarterly statement Tesco said Ireland had been hit harder then other markets as austerity measures dampened consumers’ spending power.

“In all markets, consumers continue to exercise caution in their shopping habits, as they face the direct impact of a variety of austerity measures linked to the tough economic environment.

“The impact of these external pressures increased in Ireland, with a significant reduction in consumer sentiment and spending following the announced introduction of a local property tax on residential properties,” the company statement said.

Tesco has been losing the battle for customers in Ireland according to the most recent Kantar worldpanel. The retailer has lost 2.6% market share but remains the dominant company with more than 27% of the grocery market.

In Britain it posted a drop in quarterly underlying sales, resuming a trend seen for most of the past three years and raising doubts about its €1.1bn turnaround plan.

Shares in the supermarket group fell up to 4.9% yesterday after it said it had suffered from weak demand as cash-strapped Britons cut back on discretionary purchases, as well as the fall-out from Europe’s horsemeat food contamination scandal.

The company’s CEO Philip Clarke is planning to overhaul the supermarket’s merchandise offering, moving away from items such as consumer electronics, and increasing its focus on higher growth, higher margin categories like clothing.

While changes to the product range mean Tesco will lose some sales in the short term, profit margins won’t be affected as the categories being reduced aren’t profitable, Mr Clarke said.

Getting the general-merchandise offer right “is certainly a key issue as Tesco built a ton of big superstores and hypermarkets with the express intention of selling loads of non-food,” Nick Bubb, an independent retail analyst, said.

“How they shrink that non-food space and repurpose it will be a big test for the new UK management team.”

Additional reporting by Bloomberg and Reuters