The chief executive of Tesco has reiterated the supermarket chain’s commitment to Northern Ireland despite what he termed “teething issues” in supplying stores in the region.
“I can tell you with 100 per cent confidence that we are committed to our customers in Northern Ireland and we will find a solution for them,” said Ken Murphy, who took over at the helm of the UK’s biggest grocer in October.
Tesco was among the companies that wrote to the UK government urging it to help find less burdensome ways to supply Northern Irish stores from the UK once the current simplified processes expire at the end of March.
Gaps have already appeared on supermarket shelves in the region as supermarkets grapple with new customs procedures. Mr Murphy said ready meals and some processed meat products were particularly challenging because of their short shelf life.
“If they are held up for four hours in customs then we are effectively losing a day of shelf life,” he told reporters on a conference call.
“We are asking governments to help us plan and prepare for the end of the grace period. We’re all conscious it’s only three months away and we have to move quickly,” he said.
“But I remain confident that will happen. We have injected a sense of urgency into it, we await the government’s response and we remain ready to work with them.”
Unlike its UK rivals, Tesco has a large grocery business in Ireland, where it is the second-largest operator with a 22 per cent market share. Mr Murphy, who is himself Irish, said this made it “slightly easier” to respond to the supply challenges.
“We are the biggest player in Northern Ireland and a significant business in the Republic. So we have scale to invest and make sure we have the best processes,” he said, adding that he was “less worried [about supply chains’ than I was three days ago . . . things have already improved”.
Mr Murphy’s comments came as Tesco reported UK same-store sales growth of 8.1 per cent for the six weeks to January 9 and warned that the costs of coronavirus mitigation measures would be higher than previous forecasts.
For the full year, Covid-19 costs will be £810m, against a previous forecast of £725m. The retailer reiterated that full-year profit would be similar to last year’s, prior to the impact of repaying business rates relief.
The sales growth in the UK was above market consensus but less than some of the more optimistic forecasts. It compares with growth of 7.3 per cent at Wm Morrison and 9.3 per cent at J Sainsbury over equivalent periods.
Analysts at Citi described the statement as “an incremental positive” but Clive Black at Shore Capital said Tesco “has not shot the lights out”, contrasting the performance with a forecast upgrade at Sainsbury’s and noting the drag from wholesaler Booker and central Europe.
Booker’s sales grew 12.4 per cent, boosted by acquisitions and strong sales to convenience stores that offset a 30 per cent fall in sales to the hospitality industry.
Sales in central Europe — Tesco has stores in Hungary, the Czech Republic and Slovakia — were down 4.2 per cent over the Christmas period due to Covid-19 trading curbs. The group sold its Polish operation last year.
Income at Tesco Bank fell 27 per cent, reflecting the impact of the pandemic on borrowing, travel money and cash machine use. Tesco continues to expect a loss of up to £200m for the full year at the bank.
The company’s shares were down 1.5 per cent in mid-morning trade on Thursday.
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