UK’s Tesco forecasts profit rise after building ‘strong momentum’

By Thomson Reuters Apr 10, 2024 | 1:44 AM

By James Davey

LONDON (Reuters) -Tesco, Britain’s biggest retailer, forecast a further increase in profit in its new financial year as strong demand and new customers helped it to post an 11% jump in 2023/24.

The supermarket group,which has a 27.3% share of Britain’s grocery market, up 40 basis points on the year, also said inflationary pressures had “lessened substantially” and it was seeing signs of improving consumer sentiment.

“Customers are choosing to shop more at Tesco, which is reflected in growing market share as they respond to the improvements we’ve made to the value and quality of our products,” said CEO Ken Murphy, noting it now had “strong momentum”.

Tesco on Wednesday forecast retail adjusted operating profit, its key profit measure, of “at least” 2.8 billion pounds ($3.55 billion) for its 2024/25 year.

It made 2.76 billion pounds in the year to Feb. 24 2024, slightly ahead of guidance of 2.75 billion pounds and up from 2.49 billion pounds made in the previous year.

Group sales, excluding VAT sales tax and fuel, rose 7.4% to 61.5 billion pounds, with UK like-for-like sales up 7.7%.

The group, whose shares are up 9% over the last year, is benefiting from a strategy of matching the prices of discounter Aldi on key items, and the popularity of its Clubcard loyalty scheme, which provides lower prices for members.

These programmes have been being financed by taking over 1 billion pounds of costs out of the business in the two years to February 2024.

Tesco has also benefited from consumers looking to save money by cooking and entertaining at home rather than dining out, with sales of its “Finest” premium range up 15.7% in the year.

The group also said it would buy back a further 1 billion pounds worth of shares over the next year, having already purchased 1.8 billion pounds since October 2021.

($1 = 0.7890 pounds)

(Reporting by James Davey; Editing by Kate Holton)