Tesco has posted an increase in both profits and sales during its first half, as well as raising its full-year profit guidance, as its investment in value and quality pays off.

Ken Murphy

Ken Murphy said customers are ‘voting with their feet as they switch from premium retailers to Tesco’

Tesco reported adjusted operating profit of £1.4bn for the 26 weeks to August 26, 2023, up 14% from £1.3bn in the previous year.

The retailer also posted an 8.9% increase in group sales excluding VAT and fuel year on year, from £28.24bn to £30.75bn, while like-for-like sales across retail were up 7.8%.

Sales for the UK and Ireland also jumped 8.4% as Tesco said it saw inflation fall across the half.

Tesco credited its bid to offer value for its success and said it was “consistently the cheapest of the full-line grocers” with its “powerful combination” of Aldi Price Match, Low Everyday Prices being locked until January 2024 and its Clubcard offers.

In terms of outlook, Tesco said it will continue to prioritise investing in its customer offer and working with suppliers to “reduce prices wherever we can”.

Tesco expects retail adjusted operating profit for the 2023/24 full-year to reach between £2.6bn and £2.7bn.

Chief executive Ken Murphy said: “We know how challenging it is for many households across the country, as they continue to grapple with ongoing cost of living pressures. We are committed to doing everything we can to drive down food bills and Tesco is now consistently the cheapest full-line grocer.

“Our investments in value, and in improving more than 1,100 own-brand products from pasta to fresh fish, are helping us to offer outstanding quality at great prices, all underpinned by market-leading availability. Customers are responding well, contributing to market share gains in-store and online. 

“We’re seeing the results at both ends of the basket, with strong growth in our Finest range as shoppers look to save by treating themselves at home, voting with their feet as they switch from premium retailers to Tesco.

“This relentless focus on customers, combined with significant cost reductions from our ‘Save to Invest’ programme, has driven our strong performance in the first half of the year.  Food inflation fell across the half and while external pressures remain, we expect that it will continue to do so in the second half of the year.

“We are in a strong position to keep investing for customers, and will continue to lower prices wherever we can.”