Following Asda’s warning of price hikes due to tax increases in last month’s Budget, Shore Capital analysts have forecast Tesco PLC will signal a £250 million uplift in costs.
Asda last week became the latest to flag up a jump in costs following the Budget, which saw employer national insurance contributions (NIC) lifted from 13.8% to 15% and the threshold at which these are paid cut from £9,100 to £5,000.
This would increase Asda’s tax bill by £100 million, chairman Stuart Rose said, after J Sainsbury PLC and Marks and Spencer Group PLC also previously warned of £140 million and £60 million hits respectively.
“All in this suggests that Tesco UK will be hit to the tune of [around] £250 million,” Shore Cap said.
“Such costs cannot, in our view, be absorbed by a still low margin and low capital return sector, even with some improvement in both metrics in recent times.
“Positive UK grocery price inflation can now be anticipated throughout 2025 and right up to spring 2026.”
Shore Cap’s comments come after Asda unveiled third-quarter figures last week, which showed a 2.5% drop in sales to £5.3 billion.
This implied a 6% drop in same-store sales, according to analysts, and “potentially much worse” superstore grocery rates.
“For Asda, NIC is needed like a hole in the head,” Shore Cap added, with the figures showing Asda continuing to struggle in the wake of its takeover by TDR Capital.
Overall, Shore Cap said an uplift in ongoing food inflation of "at least" 2% to 3% was expected as a result of the Budget.