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A Tesco supermarket in Potters Bar, the UK. Picture: Picture: BLOOMBERG/CHRIS RATCLIFFE
A Tesco supermarket in Potters Bar, the UK. Picture: Picture: BLOOMBERG/CHRIS RATCLIFFE

London — Tesco, Britain’s biggest supermarket group, lifted its annual profit forecast on Thursday after gains in market share drove a 10% rise in the first half, giving it momentum in the run up the festive season.

The group, which has an almost 28% share of the UK grocery market, saw it shares climb 3%, taking gains so far this year to 26%.

CEO Ken Murphy said work to improve Tesco’s value and the quality of its products and service had delivered volume growth ahead of expectations in its first half to August 24.

“It gives us great momentum going into Christmas,” he added.

Tesco was planning for strong festive demand in the belief that the UK consumer was “in reasonably good shape”.

Tesco expects retail adjusted operating profit, its preferred profit measure, of about £2.9bn for its 2024/25 financial year, up from a previous forecast of at least £2.8bn.

It made £2.76bn in 2023/24 and £1.56bn in the first half of its 2024/25 year.

Like-for-like sales in the UK rose 3.5% in the second quarter, after a 4.6% increase in the first, reflecting an easing of inflation.

Tesco also benefited from matching the prices of discounter Aldi on nearly 800 items, and the popularity of its Clubcard loyalty programme, which provides lower prices for members and is financed by cost savings.

Tesco’s market share rose 60 basis points year on year to 27.8% in the 12 weeks to September 1, the highest since January 2022, researcher Kantar said.

In contrast to Tesco’s update, other UK retail data has been subdued, particularly for more discretionary, bigger ticket items such as furniture, kitchens and bathrooms.

Non-food products represent just 7% of Tesco’s sales.

Surveys have shown UK consumer confidence fell after warnings from Prime Minister Keir Starmer about the economy’s weakness and the likely need for tax increases in an October 30 budget.

On Wednesday, the boss of rival Sainsbury’s said consumers will be cautious about spending until the budget brings clarity and interest rates fall further.

Reuters

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