Tesco sees its Irish revenues jump 14%, but warns of slower sales as restrictions ease 

Retail giant's pre-tax profits for the full year dropped 20% due to the cost of adapting the business for the pandemic

Revenues at the Irish operations of supermarket giant Tesco jumped nearly 14%, to just under £2.7bn (€3.1bn) last year, with it seeing particularly strong growth in its large stores and in online sales.

Tesco is currently the second-largest supermarket retailer in Ireland, with 21.6% of the market.

Tesco Ireland CEO Kari Daniels said management was “very pleased” with the Irish performance, “during what has been an incredibly challenging year for everyone due to Covid-19". 

Costs caused drop in profit 

On a group-wide basis, Tesco reported a 20% drop in full-year pre-tax profit as the cost of adapting the business for the pandemic wiped out the benefit of “exceptionally strong” grocery sales.

Tesco took on nearly 50,000 temporary staff to cope with the higher demand and cover self-isolating workers, while it also had to adapt its stores and online picking for social distancing.

The changes cost £892m in Britain alone, with around a quarter of the extra spend expected to recur this year.

With restaurants and cafes shut for large parts of the last 12 months, supermarkets saw a surge in demand online and in stores as shoppers stocked up on food during lockdowns.

Fewer visits, but bigger baskets

Tesco’s Cork-born group CEO Ken Murphy said customers shopped a third less frequently, but their baskets were about 50% bigger. Tesco’s online sales jumped 77% to £6.3bn.

However, Tesco said it expects grocery sales growth to slow this year as pandemic restrictions ease and consumers gradually start returning to offices and eating less at home.

Tesco forecast that lower costs will, however, allow profit from its grocery business to recover to pre-pandemic levels.

Group revenue, excluding fuel, rose 7% to £53.4bn, but pre-tax profit fell 19.7% to £825m.

Uncertainty about the future

Shares in Tesco fell as much as 3%, making it the worst performer on the Ftse-100 as the retailer said uncertainty around a recovery made it difficult to predict the year ahead.

It said its best estimate was for retail operating profit to recover to a similar level as in 2019/20, the year before the pandemic.

Mr Murphy said the pandemic had shown that Tesco was an agile business. Online volumes would “contract somewhat” as more customers returned to stores but productivity would continue to improve, he said.

• Additional reporting Reuters and Bloomberg