TESCO IRELAND is transferring international supplier purchasing to its British parent in a move that may increase pressure on Irish firms.

Revenues at the grocery retailer rose 5.2 per cent to €3.15 billion for the year to the end of February, the company said yesterday, although if the impact of 16 new stores is stripped out, like-for-like sales were down 4.2 per cent.

Tony Keohane, chief executive of Tesco Ireland, described 2008 as “challenging” and said the switch to international buying was a response to weak consumer demand and a rise in cross-Border shopping.

He said that the move would result in cheaper prices on certain product lines.

The company is also seeking to transfer contracts with international suppliers from a euro basis to sterling.

“International suppliers treat every country differently. We are asking them to treat us as they treat our nearest neighbour,” Mr Keohane said.

While the move does not directly impact on Irish-based companies, Mr Keohane said Irish suppliers will have to respond to internationally sourced products that may be cheaper.

“If they compete with the international products, there will be no decision on our side. If customers decide to buy a competing cheaper line, then that is a different issue.”

He said the company expects to spend €650 million with Irish suppliers this year.

Farm groups, North and South, accused the group of driving farmers out of business in their drive for even bigger profits at the expense of food producers.

President of the Irish Farmers’ Association Pádraig Walshe said staple food items were being abused by supermarkets as loss leaders, and he called for regulation of the retail sector before it destroys Irish farming.

The Ulster Farmers’ Union said Tesco’s record profits showed it had the power to address many of the problems facing the farming industry.

Tesco estimates 4 per cent of the grocery market has moved to the North over the last 12 months.

Mr Keohane said the company does not recoup sales lost from the Republic because the retailer does not have outlets in the main Border towns.

An internal Tesco briefing document prepared for suppliers said consumers were responding to the price differential in the North, and like-for-like sales in its stores in the Republic were “well below expectations”.

Despite falling demand, Tesco Ireland said sales of clothing rose 45 per cent last year while sales of core grocery, meat, fish and bakery products also increased.

Two replacement stores are being planned at Douglas, Cork and Ballinasloe, Co Galway this year, with Mr Keohane saying that the economic slowdown means an unspecified number of Tesco Express outlets would be the limit of its expansion.

Staff at Douglas have voted for industrial action after the company proposed changes in conditions.

In the North, the group has plans to expand three existing outlets located at Knocknagoney, Newtownbreda and Carrickfergus into Extra stores, which it said could create hundreds of retail and temporary construction jobs.

Tesco Ireland is the largest retailer in the State, with 116 stores and 15 petrol stations. It employs 13,500 people.

As usual, it did not provide profit data for its Irish division. Tesco Ireland profit data is included as part of data on the group’s international business arm.

Meanwhile, international sales rose 14 per cent at constant exchange rates.

Tesco Group posted a record 10 per cent rise in underlying annual profit to £3.128 billion (€3.54 billion) in the 53 weeks to the end of February, and a 15 per cent rise in sales to £59.4 billion.