Tesco hiked its profit forecast for the year this morning on the back of strong first half sales and profits.
The grocery giant reported a rise in adjusted operating profit of 13.9% to £1.48bn, with UK like-for-like sales jumping 8.7%, as it said its focus on value paid off.
CEO Ken Murphy claimed Tesco was “consistently the cheapest of the full-line grocers across the first half”.
We delve into what we learnt from the results and what Murphy is planning next for the supermarket giant.
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Inflation is easing and will continue to fall
Earlier this week, the British Retail Consortium revealed that UK food prices fell for the first time in almost two years in September, down 0.1% month-on-month.
Murphy said that Tesco has seen “inflation come down progressively over the last six months.
“Our suppliers are working closely with us to try and drive down costs and where you’ve seen some of the more extreme cost increases over that last 18 months is also where we’re starting to see costs come down the most.”
He said that Tesco is still seeing some inflation across categories such as chicken, meat and potatoes, however added that on the whole, “we are seeing deflation and we’re hoping to see that continue through the second half”.
Tesco to ‘double down’ on value
Murphy explained that “consumers are feeling a bit chipper” as a result of stability in pricing and vowed to do what he can to ensure this continues.
“We want to double down our efforts to be even more competitive on value,” he said. “If you think about the everyday items you need to buy on a daily basis, we match Aldi line for line on 650 products.
“On a further 1,500 products we match Home Bargains or B&M so on any given day, on about 1,500 to 2,000 lines, a customer doesn’t have to look anywhere else for a cheaper product.”
Over the first half of 2023, Tesco cut prices on 2,500 products, with average savings of 12%, and Murphy said that the grocer will “take every opportunity to reduce the price of products.”
Tesco is also “making big efforts to make convenience stores more affordable and shoppable” as it has introduced more lower priced own-brand products in its Express stores, which has seen savings of up to 40% in comparison to the items replaced.
Shoplifting on the rise – but citizen’s arrest is not the answer
According to the BRC, violence and abuse towards retail workers has doubled in the last four years.
Last month, Murphy called for tougher laws and changes to policing, and Tesco has since offered body worn cameras to store workers and introduced new protective screens at hundreds of its Express stores and petrol station kiosks.
Speaking of the rising levels of retail crime, he said that “it is totally unacceptable that anybody should have to suffer any abuse, either verbal or physical at work”.
While Tesco has experienced “a relatively small number of incidents”, Murphy added that “it is on the rise, it’s up by 30% year on year”.
He said that in order to tackle this, Tesco would “welcome the opportunity to work much more closely with police forces to identify and bring justice to the perpetrators”.
However, Murphy urged colleagues and shoppers not to follow policing minister Chris Philp’s advice of making a citizen’s arrest on shoplifters.
He said: “We are really clear with our colleagues and with customers that we would absolutely not want them to put themselves in harm’s way.”
Tesco promises an “affordable Christmas” for shoppers
This year, Tesco is looking to make Christmas less expensive as Murphy said its summer price lock on 650 items will be extended to 700 products for the festive season.
“We’ve got a few really important months ahead and we’re committed to doing everything we can to drive food bills to make sure that customers can have a fantastic and affordable Christmas by shopping with Tesco,” he said.
While Murphy expressed concerns that the current cost-of-living crisis “will still be challenging for a number of families,” he added that overall, “we think the customer is in good shape for this Christmas”.
In terms of its food offering, he said that Tesco is “super excited” about the “absolutely fantastic” range of food on offer this year.
As part of its selection, Tesco will be offering over 100 Plant Chef and Free From products, as well as a wider range of centrepieces with a variety of turkey options, alongside re-imagined alternatives such as a pigs in blankets topped steak pie.
