Tesco pledges an ‘affordable Christmas’ as it raises profit guidance on slew of price cuts
Tesco raised its profit guidance for the year ahead to up to £2.7bn, as the Big Four grocery thanked a slew of price cuts for surging revenues in its interim results.
Britain’s biggest grocer’s adjusted operating profit reached £1.48bn during the term, a 13.5 per cent leap when compared to the same period the prior year.
Its banking arm also performed well with operating profit leaping 25 per cent to £65m.
Revenues at the shopping giant also grew five per cent to £34.1bn, as its continued to wheel out dozens of price cuts to compete with discounters such as Aldi and Lidl amid the cost of living crisis.
The firm recently announced it would price lock over 1,000 everyday products until 2024, to keep in fickle shoppers’ favour.
As shoppers looked to save money, Tesco’s clubcard sales also soared 80 per cent in the UK and Ireland.
Its food sales also grew 10.6 per cent as Tesco upped its product range launching 350 new products including Asian ready meals and 1,150 own brand products, including the relaunch of its fresh fish and pasta ranges.
Ken Murphy, chief executive of Tesco, said: “We know how challenging it is for many households across the country, as they continue to grapple with ongoing cost of living pressures.
“We are committed to doing everything we can to drive down food bills and Tesco is now consistently the cheapest full-line grocer.”
“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.”
He added it is “doing everything in our power to make sure customers can have a fantastic, affordable Christmas by shopping at Tesco.”
Tesco’s shares are up by a fifth over the past year and it has the largest market share of any grocery store in the UK.
The company’s share price was up 2.97 per cent this morning as markets responded to the news.
John Choong, equity analyst at investing comparison platform, InvestingReviews.co.uk, said:“The juicy numbers in Tesco’s interim results will delight investors. While group revenue rose by a respectable five per cent , the more encouraging point to take away is that its operating margin grew once again.
“As a result, the conglomerate now expects an adjusted retail operating profit of £2.6bn to £2.7bn, up from its previous guidance of £2.5bn.”
He added: “This doesn’t come as a surprise as wholesale commodity prices have continued to decline while Tesco’s open book contracts with most of its suppliers have played to its advantage. “
Zoe Gillespie, investment manager at RBC Brewin Dolphin, added: “Tesco has delivered another strong set of results, as its long-term turnaround strategy continues to pay off.
“The supermarket’s profitability has surged, following a series of self-help measures to strengthen its position as the top performer in a highly competitive sector.”
She added: “Tesco is generating huge amounts of cash, much of which is being used to keep prices low. Inflation also looks likely to ease in the second half of the year, despite external pressures. It is increasingly looking like the best-placed of the UK’s major supermarkets, particularly as higher interest rates impact on more leveraged rivals.”