Tesco sees limited Brexit disruption to Irish supplies

Tesco has experienced some disruption to supplies, particularly to the island of Ireland, since a post-Brexit trade deal with the European Union kicked in on January 1, its chief executive Ken Murphy said today.

“We have seen some limited disruption into the Republic of Ireland and into the north of Ireland, but we’re working very closely with government on both sides of the Irish Sea to smooth the flow of product,” Mr Murphy told reporters.

He said Tesco’s product availability in both markets “remains strong”. 

The disruption was limited to certain categories such as short shelf life ready meals, he said. 

Ken Murphy said he was confident Tesco would have the right measures in place to supply Northern Ireland after the end of a three month grace period on certain rules and regulations with the EU on March 31. 

He also said there had been “teething problems” with supply flows from continental Europe to the UK. 

“Inevitably there are bedding-in issues, teething issues, that you would expect with any new process that’s been set up at relatively short notice,” he said. 

“We’re working our way through those and we would hope over the coming weeks and months that we will end up with a much smoother flow of product,” he added.

Meanwhile, Tesco has today followed rivals in reporting buoyant Christmas trading, as pandemic restrictions meant people splashed out on celebrations at home. 

The group said UK like-for-like sales growth was 6.7% in its third quarter to November 28, accelerating to 8.1% in the six weeks to January 9.

“We delivered a record Christmas across all of our formats and channels,” said CEO Ken Murphy, who succeeded Dave Lewis in October. 

Tesco said that like-for-like sales over the 19-week period at its Irish operations grew by 12.1% with the strongest contribution from its large stores. That included a 12.7% increase in the six weeks to January 9.

It said its online grocery sales in Ireland surged by almost 70% as it increased capacity in response to record demand. 

Kari Daniels, Tesco Ireland CEO, said the company’s workers continue to rise to the challenge of Covid-19.

“I acknowledge their continued hard work, dedication and resilience,” Ms Daniel said.

“As has been the case throughout pandemic, we continue to work hard to protect the safety of colleagues and customers with extensive measures in place throughout our stores,” she added.

The Tesco Ireland boss that while there here has been a slight increase in demand in stores and online, the company continues to have good availability with plenty of stock to go around. 

“Owing to our extensive preparation, stock-building and collaboration with suppliers, our supply chain remains robust and is responding well,” Kari Daniels said. 

“We’ve worked extensively with our suppliers to minimise disruption, so we’d encourage our customers not to change their shopping habits at this time,” she added.

Tesco’s update today follows strong Christmas trading reports from its UK rivals Sainsbury’s, Morrisons and Lidl. 

Restrictions to contain the virus mean many people are working from home and the hospitality sector is closed.

Adding to the demand for food and drink, many people who normally travel abroad for Christmas had to stay at home. 

The company highlighted a 14% rise in sales of its premium ‘Finest’ range, with 69 million mince pies and 8 million bottles of champagne and sparkling wine sold. 

Tesco estimated additional Covid-19 costs would be £810m in its 2020-21 year, up from £725m forecast in October. 

But it still maintained its guidance for 2020-21 retail operating profit before exceptional items of “at least” the same level as 2019-20’s, excluding the repayment of £535m of business rates relief. 

Tesco also continues to expect to report a loss for Tesco Bank of between £175-200m for the year.

“Our focus on looking after our customers, including delivering record availability, robust safety measures and great value, has enabled us to maintain strong momentum through the Christmas period, outperforming the market every week,” Ken Murphy, the chief executive of Tesco, said. 

“We delivered a record Christmas across all of our formats and channels. In response to unprecedented demand for online groceries, colleagues delivered over seven million orders containing more than 400 million individual items over the Christmas period,” the new CEO said.

“We’re in great shape to keep delivering in 2021 and beyond,” he added.