Top grocer Tesco has unveiled “a vast new price-lock commitment” and increased hourly-pay pay for the second time this year as the cost of living crunch hits consumers and colleagues alike.

Tesco storefront

Tesco is freezing the prices of approximately 1,000 everyday products

Tesco revealed the initiatives as it reported a fall in first-half profits, caused in part by the impact of inflation but primarily by a decline in year-on year-volumes as conditions normalised in the aftermath of the pandemic. Adjusted operating profit fell 9.8% to £1.32bn, on group sales 3.1% up to £28.18bn.

Tesco is freezing the prices of approximately 1,000 everyday products, such as McCain Home Chips, until 2023, strengthening its overall price proposition which includes Aldi Price Match and Clubcard Prices.

Next month the grocer will up its basic hourly pay rate in stores by 20p to £10.30, or £10.98 in London. Hourly rates at Tesco will then have increased nearly 8% this year.

The measures reflect volatile and tough trading conditions. Tesco said that “post-pandemic normalisation has been compounded by cost-of-living driven changes in customer behaviour” and that cost inflation was “significant”.

The retailer anticipates that full-year retail adjusted operating profit will come in at the lower end of guidance, between £2.4bn and £2.5bn. Tesco cautioned: “Significant uncertainties in the external environment still exist, most notably how consumer behaviour continues to evolve.”

Chief executive Ken Murphy said: “We know our customers are facing a tough time and watching every penny to make ends meet. That’s why we’re working relentlessly to keep the cost of the weekly shop as affordable as possible. We’re also investing significantly in our colleagues, with a further boost to pay.

“By staying laser-focused on value and sticking to our strategy of inflating a little bit less and a little bit later, our price position has got even more competitive. Customers are seeking out the quality and value of our own brand ranges as they work to make their money go further, whether they are switching from branded products, between 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 changes in the market. Despite these uncertainties, our priorities are clear. We have the right long-term strategy and we will continue to balance the needs of all of our stakeholders. Most importantly, we will stay focused on delivering value for our customers and supporting them in every way we can.”

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