Tesco’s profits collapsed in the first half of the year, with pre-tax profit plunging 64% to £413m, as the group grappled with “significant” cost inflation and changing consumer habits.
However, revenue rose 6.7% to £32.5bn in the period, while the group announced it would also raise hourly pay for the second time this year.
In its latest update, Tesco said it now expects full-year profits of between £2.4bn and £2.5bn, down from previous guidance of £2.4bn to £2.6bn. It comes after the group warned that normalization after the pandemic was complicated by the cost of living crisis and its effects on customer behaviour.
However, the group maintained a “solid” UK market share performance, in line with expectations, noting that a “powerful” combination of Aldi Price Match, Low Everyday Prices and Clubcard Prices have helped ease the pressure on customers’ living costs.
In a separate announcement, the group revealed a “major” new price-locking commitment that will see the prices of more than 1,000 everyday products frozen until 2023. All products are included in its low everyday prices campaign.
The supermarket giant also confirmed staff will receive a further pay rise in the second hourly pay increase this year, with a “major investment” aimed at helping staff cope with the cost of living crisis.
From 13 November 2022, the basic hourly rate of pay in shops will rise by a further 20p to £10.30 (or £10.98 in London). This equates to an hourly increase of nearly 8% this year.
It is also doubling its Colleague Clubcard discount to 20% during the key Christmas shopping period of December 13-19.
Ken Murphy, chief executive, said: “We know our customers are facing a difficult time and are watching every penny to make ends meet. That’s why we work tirelessly to keep the price of your weekly shopping as affordable as possible with our powerful combination of Aldi Price Match, everyday low prices and club card prices, together covering more than 8,000 products, week after week.
“We are also investing significantly in our colleagues, with a further payments boost announced today for our UK stores. I want to say a big thank you to the whole team at Tesco and our supplier partners – together we have built a more sustainable, consistent business that is well set up for the future.”
He added: “By remaining laser-focused on value and sticking to our strategy of inflating a little less and a little later, our price position has become even more competitive. Customers are looking to the quality and value of our own brand range as they work to make their money go further, whether they’re switching from branded products, across categories or cutting back on eating out.
“As we look to the second half, cost inflation remains significant and it is too early to predict how customers will adapt to ongoing market changes. Despite these uncertainties, our priorities are clear. We have the right long-term strategy and will continue to balance the needs of all our stakeholders. Most importantly, we will remain focused on delivering value to our customers and supporting them in any way we can.”