Tesco Irish brand 'being damaged'

Tesco's Irish operation has been hit by cross-border shopping

Cross-border shopping is damaging Tesco's brand in the Republic of Ireland, according to an internal memo obtained by a grocery trade journal.

Tesco is being forced to cut prices in the Republic, and the supermarket giant is concerned that like-for-like sales are "well below expectations".

Retail Intelligence reported goods such as household products and beauty items were particularly affected.

On Tuesday, Tesco posted the highest profits on record for a UK retailer.

In the memo, it said sales lost by Tesco stores in the Republic were not being recouped because the company does not have a strong presence in border towns such as Newry and Enniskillen where rivals like Sainsbury and Asda have benefited from the southern exodus.

The effect on the Irish economy of shoppers heading north was acknowledged in an emergency budget earlier this month, when duties on petrol and alcohol were unchanged in an attempt to stem the tide of shoppers taking their business across the border.

'Unacceptable'

In the company memo, it said: "Consumers, media and government associate Tesco Ireland almost exclusively with price differentials between Northern Ireland and Ireland.

"Having invested circa £3bn in Ireland, the damage to the Tesco Ireland brand by our almost exclusive association with the retail premium versus Northern Ireland is unacceptable."

On Tuesday, Tesco reported underlying annual pre-tax profits of £3.13bn, an improvement of 10% on the previous year.

The supermarket chain did not give a detailed breakdown of its performance in the Republic, but it did say business had been helped by favourable movements in the euro-sterling exchange rate.

It said that a combination of tight cost-control and more international buying had helped it invest in lowering prices.

It said these investments were even more necessary given the steep rise in cross-border shopping encouraged by the strength of the euro - which has seen an estimated 4% of the total market move across the border.

'Fillip'

In Northern Ireland, Tesco said hundreds of jobs would be created by converting three existing outlets into its larger Extra stores.

The shops to be extended are located at Knocknagoney and Newtownbreda in Belfast and in Carrickfergus.

Chief Executive Terry Leahy said: "In addition to brand new retail jobs, it is a fillip for the construction industry as the openings signal continuing investment in Northern Ireland by Tesco through the downturn.

"The total investment by Tesco in the province has now reached over £450m, with a total of 47 stores in the region."