Shore Capital: Tesco Ireland Down, But Not Out
Published on Dec 19 2013 12:05 PM in Retail
The director of leading UK stockbroking firm Shore Capital, Clive Black, has told Retail Intelligence that while the performance of Tesco in Ireland "has not panned out as the retailer would have wanted it to", it remains versatile enough to return to growth.
Last week, Tesco revealed that its like-for-like sales in Ireland fell 8.1% in Q3, following on from a 4.4% decline in Q2 and a 3.0% decline in Q1.
“Ireland is the most profitable, important part of the European division and in that respect to see a near collapse of like-to-like sales to that magnitude has got to be concerning local and central management," Black said.
However, he feels the recent launch of 'Price Promise', which has drawn a mixed response from commentators (and an ironic 'welcome' by Aldi, click here), "shows a level of intent" that the retailer can hope to build on.
"Anyone who thinks Tesco is going to be cheaper than Aldi in every department is living on the moon," he told RI. "When times are very tough, the discounters serve a purpose, but I think what Tesco need to put their mind to now is to concentrate on what they have that the discounters don’t."
Suggestions that 'Price Promise' has not been as effective as Tesco had hoped were reiterated in comments by its UK chief executive Philip Clarke last week, quoted in The Sunday Times. "The idea was to stop leakage of sales because of the very hard-pressed nature of the consumer [in Ireland] at the moment," he said of the scheme.
The reaction of Tesco's competitors, Clarke added, was to introduce "vouchering on an unprecedented scale, so that hasn't helped our like-for-like sales performance - in fact, the contrary."
Black expects newly-introduced aspects of the Tesco's UK operation to be introduced to the Irish market in the New Year as the retailer seeks to redefine its position here.
"I think Tesco will be looking to bring some of the features from the UK, increase the area for food, increase the food counter proposition and the quality of the food counter, as well as selected non-food areas: F&F (Tesco's clothing line), toys, personal care, stationery. Rather than try to be all things to all people, which is really where they were four or five years ago.”
© 2013 - Checkout Magazine by Stephen Wynne-Jones