Tesco PLC (LSE:TSCO) raised its profit guidance for the year after a strong first half and signalled it expects food inflation to fall in the second half of the year.
The grocer now expects retail adjusted operating profit between £2.6 billion and £2.7 billion for the 2023/24 financial year, ahead of previous guidance of £2.5 billion.
The UK’s biggest retailer said sales in the 26 weeks to 26 August 2023 rose 8.9% to £30.75 billion from £28.24 billion, with UK like-for-like (LFL) sales up 8.7%, Republic of Ireland LFL sales growing 8.4% and Booker LFL sales increasing 7.5%.
Tesco said it increased its market share by 30 basis points (bps) in the UK, with gains in both stores and online, and by 70bps in the ROI, with volume and sales mix trends ahead of expectations.
Ken Murphy, chief executive, said: “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.”
Adjusted operating profit jumped 14% to £1.48 billion from £1.30 billion, retail cash flow improved 6.6% to £1.37 billion from £1.28 billion and EPS climbed 17% to 12.26p from 10.50p.
Murphy said food inflation fell across the first half “and while external pressures remain, we expect that it will continue to do so in the second half of the year”.
Tesco said it had cut prices on around 2,500 products by the end of the half, from bread to broccoli, with average saving of c.12%.
Tesco Bank's adjusted operating profit rose 25% to £65 million,, primarily driven by strong income growth.
The dividend was unchanged at 3.85p.