Tesco Raises Annual Profit Guidance as Food Inflation Eases and Shoppers Flock to Low Price Offers
Tesco, the largest supermarket in Britain, has upgraded its annual profit forecast as food inflation subsides and consumers continue to take advantage of its affordable prices and premium “Finest” product range. The drop in British food prices in September, the first in more than two years, along with a decline in the annual rate of food price inflation for the fifth consecutive month, has contributed to a boost in consumer confidence.
With a commanding 27% share of the UK grocery market, Tesco is pleased to report that its price increases are lower than the headline rates, which in turn has driven its market share. As a result, the retailer now expects its preferred metric, 2023/24 retail adjusted operating profit, to range between £2.6 billion and £2.7 billion, surpassing its previous projection of approximately £2.5 billion.
CEO Ken Murphy expressed optimism about the future, stating, “Food inflation fell across the half and while external pressures remain, we expect that it will continue to do so in the second half of the year.”
In line with other supermarkets, Tesco has been reducing the prices of essential food items like milk, pasta, and vegetable oils in recent months. This strategy aligns with easing commodity and input costs and allows the supermarket to compete with rapidly expanding German discounters like Aldi by matching prices on key products. Additionally, the shift in consumer behavior towards entertaining at home rather than dining out has benefitted Tesco, as has the migration of shoppers from more expensive grocers to its stores.
The supermarket giant reported retail adjusted operating profit of £1.42 billion in the first half of the year, surpassing analysts’ average forecast of £1.35 billion. Furthermore, UK like-for-like sales experienced a notable increase of 8.7% during the same period.
These results demonstrate Tesco’s resilience in the face of challenging economic conditions and its ability to adapt to changing consumer trends. The supermarket continues to focus on providing affordable options to its customers while offering a premium range for those seeking a more indulgent experience.
– BBC News Style Guide
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