Tesco profits surge as falling inflation eases pressure on prices for shoppers
Tesco has said its profits ahve been boosted by easing shop price inflation, as it offered hope that the worst of the cost of living crisis may be over as its sales and profits surged.
The country’s largest supermarket chain said pre-tax profits hit £2.3bn in the year to February, up from £882m the year before, while sales rose by 4.4 per cent to £68.2bn over the period.
Price inflation in groceries had “lessened substantially”, the company added, improving consumer confidence. UK grocery price inflation fell to 4.5 per cent last month, its lowest level since February 2022, according to data from Kantar.
Ken Murphy, Tesco’s chief executive, said that despite the profit surge, it was “conscious that things are still difficult for many customers, so we have worked hard to reduce prices and have now been the cheapest full-line grocer for well over a year.
“We have continued to invest in helping customers where it matters most, cutting prices on more than 4,000 products and doubling down on our powerful combination of Aldi Price Match, Low Everyday Prices and Clubcard Prices.”
Tesco was among the grocers to invest heavily in price improvements amid strong competition from German discount brands Aldi and Lidl. More than 4,000 products were cheaper at the end of the year than at the start, with an average price cut of about 12 per cent,” he said.
“Customers are choosing to shop more at Tesco, which is reflected in growing market share as they respond to the improvements we’ve made to the value and quality of our products.”
Tesco said like-for-like food sales in the UK were up 7.7 per cent, with strong sales in the second half of the year. “We have strong momentum in our business, and are encouraged by signs of improving consumer sentiment,” he said.
Volumes in the supermarket’s Finest range increased 9 per cent, with record sales over Christmas. Only fuel sales fell 17.2 per cent, driven by falling petrol and diesel prices.
Inflation, Mr Murphy believes, would stabilise around a “low single digit” for the rest of the year except around some products including cocoa: “I see that stabilising, that kind of low single digit for the rest of the year is our planning assumption.”
Tesco told shareholders it saw growth supported by investment to improve value, with the retailer cutting prices on around 4,000 products over the year.
It aims to make efficiency savings of up to £500m in the year ahead, and also launch a £1bn share buyback funded by the sale of Tesco Bank to Barclays earlier this year.
Richard Hunter, of interactive investor, said the results cemented Tesco as the “pre-eminent grocer of the British aisles.
“Its appetite for lowering prices for customers is enabled by its sheer scale and strength, falling food inflation, and a significant cost reduction. In turn, this creates something of a virtuous circle, with more customers attracted by the likes of the group’s Aldi Price Match, Low Everyday Prices and Clubcard Prices.
“At the same time, it has also honed its upper-end offering, with its Finest range continuing to take market share from its rivals. Finest sales exceeded £2bn for the period, an increase of 15.7 per cent, with volumes up 9 per cent and the range now in front of 23 million customers.”
Charles Allen, global retail analyst at Bloomberg Intelligence, told BBC Radio the company had done a “lot of work” to keep up with its rivals such as Aldi and Lidl.
Its surging profits prompted Sharon Graham, the Unite union leader, to accuse it of profiteering. “Tesco is raking in mountains of cash while families struggle to put food on the table because of sky-high prices. Many companies have used the cost of- living crisis to grab excessive profits.
“There is an epidemic of profiteering in our economy – the Government has been missing in action and failed to curb it.”
