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- Shoppers are shelling out money on premium lines, while price cuts have also boosted sales.
Tesco’s boss said consumers are in “a reasonably good situation” as he raised his profit forecast for the year.
In a bullish update, the country’s largest supermarket said shoppers are snapping up premium lines while price cuts have also boosted sales.
“Although they’re not prancing down the aisle, customers are in reasonably good shape,” Tesco chief executive Ken Murphy said.
Optimistic: Tesco boss Ken Murphy said consumers are in ‘reasonably good shape’ and raised his profit forecast for the year
“There is a real buzz in our stores.”
The comments are in stark contrast to chancellor Rachel Reeves’s pessimism ahead of this month’s budget.
Sainsbury’s boss Simon Roberts warned this week that concerns about potential tax rises are spooking shoppers.
Murphy said he hoped confidence would improve. “We are preparing for a good Christmas and we are betting on a good Christmas.”
The comments came as Tesco said half-year sales reached £31.5bn in the 26 weeks to August 24, up 4 per cent on the same period last year.
Profits rose 16 per cent to £1.6bn and Tesco is now aiming for £2.9bn for the full year to the end of February, better than its previous target of “at least” £2.8bn.
Strong sales: Tesco said half-year sales reached £31.5bn in the 26 weeks to August 24.
Murphy said the business was “more competitive than ever” as it battles competition from discounters Aldi and Lidl.
Tesco cut the price of 2,850 household items by an average of 9 percent in the first half of the year, helping it cement its position as Britain’s top supermarket.
Murphy praised the “willingness” among customers “to spend a little more to treat themselves” as the group sold 15 per cent more of its Tesco Finest ranges. More than 20 million customers have shelled out money to purchase these more expensive options.
Tesco also benefited from its price matching strategy
of the discounter Aldi on almost 800 items, and the popularity of its Clubcard loyalty program, which offers lower prices for members of the program.
“Tesco is putting up a strong fight in the battle for consumers’ hard-earned money,” said Matt Britzman, senior equity analyst at Hargreaves Lansdown.
“Its market-leading proposition and earnings potential should not be overlooked and, despite the share price rise this year, there are opportunities for investors,” he added.
Shares in the FTSE 100 firm rose 2.6 per cent, or 9.1 pence, to 364 pence, taking gains for the year to 25 per cent. Mark Nelson, senior equity analyst at Killik & Co, said the stock remains “undervalued” even after this year’s rally.
Russ Mold, chief investment officer at AJ Bell, added: “For a company in such a competitive market and with an already dominant position, taking part is quite a feat.”
‘The challenge posed by German discounters has not gone away.
“But Tesco has managed to absorb it in a way that other mid-market grocery companies, such as Asda and Morrisons, have found more difficult.”
The update came after strong industry data from Kantar showing Tesco has a 27.8 per cent share of the grocery market, the highest since January 2022.
But Murphy insisted that stiff competition “keeps us on our toes.”
Murphy, 57, took home a record £10m last year – a salary of £1.4m and performance-linked bonuses of £8.6m.
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