The corporation cautions that its annual profits will fall short of forecasts as it invests in its prices and personnel to strengthen its defenses against the threat presented by bargain competitors.
As family finances tighten, the CEO of the largest retailer in the United Kingdom has stated that his company is “increasing prices a little bit less and a little bit later” than the competitors.
The statement was made by Ken Murphy, the chief executive officer of Tesco, in conjunction with the company’s announcement of its first-half profits, which reflected, according to the company, its decision to maintain the best possible value for the customer as the cost of goods increased during the cost of living crisis.
The company reported a 10% decline in retail operating profits to £1.25 billion for the six months ending on August 27.
It cautioned that as a result of “substantial” inflationary pressures and consumer reluctance, yearly profits would likely fall below its previous projection of £2.4 billion to £2.5 billion.
It was reported that consumers were opting for private-label and frozen foods and purchasing fewer non-food items.
Tesco stated that a decision to freeze prices on over 1,000 daily items also contributed to this earnings forecast.
It also announced a second wage increase for its employees this year in response to unions’ claims that the UK’s supermarket market leader had fallen behind rivals.
The shopworkers’ union Usdaw said that Tesco’s hourly-paid retail and customer fulfillment center employees will earn an additional 20p per hour increase beginning on November 13, bringing the hourly base rate from £10.10 to £10.30 per hour.
This was in addition to a 5.8 percent hike in July, bringing the total increase for the year to 7.85 percent, it added while praising the decision.
Tesco, along with Sainsbury’s, Asda, and Morrisons, has faced a challenge to its supremacy from discounters Aldi and Lidl since the financial crisis.
Last month, market share data from Kantar Worldpanel revealed that Aldi had surpassed Morrisons as the fourth largest chain.
Tesco achieved a UK like-for-like sales increase of 0.7% over the six months – recovering from a 1.5% decline in the first quarter – likely reflecting a stronger willingness by shoppers to reign in their spending outside the home as energy and other prices surge.
Mr. Murphy stated to the investors, “We are aware that our consumers are going through a difficult time and are scrimping to make ends meet.
The combination of Aldi Price Match, Low Everyday Prices, and Clubcard Prices, covering more than 8,000 products each week, enables us to keep the cost of the weekly shop as inexpensive as possible.
“By maintaining a laser-like focus on value and adhering to our strategy of inflating a bit less and a bit later, our price position has become even more competitive,” he added.
Shares, which were down more than a quarter so far this year, slid 1.5% at the opening of the market.
