Tesco lifted its annual profit forecast on Thursday after market share gains drove a 10% rise in the first half, giving the retailer momentum ahead of the festive trading period.
Shares in Britain’s largest supermarket group climbed 3%, taking its gains so far this year to 28%.
Tesco currently holds nearly 28% of the UK grocery market.
Chief executive of the group Ken Murphy said Tesco’s work to improve its value and the quality of its products and service had delivered volume growth ahead of its expectation in its first half to 24 August.
Murphy told reporters, “It gives us great momentum going into Christmas.”
Tesco was planning for strong festive demand, he said, believing the UK consumer was “in reasonably good shape.”
Profit
The group expects retailer adjusted operating profit – its preferred profit measure – of around £2.9 billion for its 2024/25 financial year.
This was up grom a previous forecast of at least £2.8 billion.
It made £2.76 billion in 2023/24 and £1.56 billion in the first half of its 2024/25 year.
Its like-for-like sales rose 3.5% in its second quarter, following a 4.6% increase in the first, reflecting an ease in inflation.
Tesco also benefitted from its Aldi price-matching strategy on nearly 800 items, and the popularity of its Clubcard loyalty scheme which provides lower prices for members.
Cost savings finance these programmes.
UK Retailers
Tesco’s market share rose 60 basis points year-on-year to 27.8% in the 12 weeks to 1 September, its highest since January 2022, according to Kantar.
In contrast to Tesco’s update, other UK retail data has been subdued, particularly for more discretionary, larger ticket items such as furniture, kitchens and bathrooms.
Non-food products represents just 7% of Tesco’s sales, compared to almost a quarter of number-two supermarket Sainsburys' sales.
Sainsbury’s yesterday called for the British government to set out its tax and spending plans to ease the fears of shoppers still grappling with cost of living struggles.
Surveys have shown UK consumer confidence fell following warnings from Prime Minister Keir Starmer’s government about the British economy’s weakness and the likely need for tax increases in the 30 October budget.
Read More: Sainsbury’s Boss Looks To UK Budget To Lift Spending Gloom
