Tesco profits predicted to hit £2.75bn as it faces pressure to drop prices

Tesco profits are predicted to hit £2.75bn when it announces its full-year results on Wednesday 13 April, as it is likely to face pressure to drop prices amid rising inflation and cost-of-living concerns.

City analysts have estimated that the group’s operating profits will be in the region of £2.75bn after Tesco bosses revealed that profits would be above expectations.

The supermarket giant currently boasts a 27.4% share of the grocery market, according to market analyst Kantar.

City analysts expect Tesco to maintain this lead after a busy Christmas trading period meant it dominated across the grocery market, with all other Big 4 grocers – Sainsbury’s, Asda and Morrisons – seeing their share decline.

Read more: In Pictures: Tesco’s Hot Cross Bun Café

With inflation soaring and families struggling as the cost-of-living crisis begins to hit, it is likely that Tesco will face calls to reduce prices in line with low-cost competitors. The City will be keen to hear how the grocery giant intends to support its consumers throughout this period.

UK households are set to be £900 worse off this year with the lowest earners disproportionately affected with a loss of up to £1,300, according to a recent PwC report.

As a result, consumers are expected to reduce spending on both the weekly food shop and the smaller, mid-week ‘top-up’ shops.

Investment platform AJ Bell said Tesco may have some “pricing power” against cost inflation as a key provider of consumer staples and given its domination of the market.

AJ Bell’s financial analyst Danni Hewson said: “At a time when inflation is a key concern, and customers will start to trade down or even buy less, this could be a useful part of Tesco’s armoury when it comes to driving profits and cash flow and protecting profit margins.”

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