Tesco Irish sales join group recovery

Like-for-like sales at Tesco’s Irish operations showed marginal growth of 0.2% in the three months to the end of May — the first quarter of the British supermarket giant’s financial year.

Overall, the period marked Tesco’s sixth consecutive quarter of group growth and the strongest UK sales growth in seven years.

Group chief executive Dave Lewis has been leading a fightback after Tesco’s profits were hammered by changing shopping habits, the rise of German discounters Aldi and Lidl and an accounting scandal in 2014.

He stabilised the business and then got it growing again with a focus on lower prices, new and streamlined product ranges, better customer service and much-improved supplier relationships.

UK like-for-like sales rose 2.3% in the first quarter, well ahead of analyst expectations of 1.7%-2% growth. On a group-wide basis, first quarter like-for-like sales grew 1%.

The rise in Irish sales, Tesco said, reflected “the deflationary effect of our ongoing investment in core food lines. Volumes grew strongly at 3.8%, including 5.3% growth in fresh foods”.

Most recent industry data from consumer insights agency Kantar Worldpanel showed Tesco regaining the number two slot in the Irish market, behind SuperValu, with a market share of 22% and a 0.3% sales increase in the 12 weeks to the end of May.

Shoppers are beginning to visit Tesco Ireland stores more regularly, as the last quarter showed a 4.6% annualised jump in volume sales for the retailer here.

Tesco’s finance chief Alan Stewart said the group’s margin and cost savings targets were unchanged after the first quarter update.

Analysts regard Sainsbury’s, Britain’s second largest supermarket group, as the most exposed to a weaker economy after buying general merchandise retailer Argos.

Other analysts say the discounters remain a major threat to Tesco and its traditional rivals, highlighting renewed momentum at Aldi and Lidl, with recent industry data recording their fastest sales growth since 2015.

The trading update, released ahead of Tesco’s annual shareholders’ meeting yesterday, showed group like-for-like sales rose 1%.

However, a 3% fall in the group’s international like-for-like sales was also evident, reflecting a decision to discontinue unprofitable bulk selling activity in Thailand.

Tesco also said it had resolved a tax issue relating to the sale of its South Korean business in 2015, releasing a £329m (€376m) provision. Tesco share were down nearly 5% yesterday.