Tesco shares hit a 12-year high yesterday as it raised its profit forecast and set the scene for a Christmas price war. With first-half sales up 5.1 per cent to £33billion in the six months to August 23, Britain’s biggest supermarket said it now expected profit of £2.9billion to £3.1billion for the full year.
That was an upgrade from an earlier forecast of £2.7billion to £3billion and sent shares up 22.7p, or 5.3 per cent, to 452.5p – their highest level since late 2013. Boss Ken Murphy hailed strong demand for its Tesco Finest range, with good weather encouraging shoppers to buy new products such as pistachio gelato and iced coffee concentrates. Warning the Chancellor against further tax increases on retailers in the Budget, he declared ‘enough is enough’.
He also said that shoppers were ‘worried’ about what Rachel Reeves has planned. However, he also said the company was poaching customers from ‘most’ of its rivals – pushing its share of the grocery market up to 28.4 per cent – leaving it ‘betting on a good Christmas’. And in a boost to shoppers feeling the pinch, Murphy said he expected competition to intensify as supermarkets battle to win customers by keeping prices low.
‘They are concerned and worried about the Budget and the economic outlook,’ he said. ‘Competitive intensity remains high, and with continued pressure on household budgets we remain committed to ensuring customers get the best possible value by shopping at Tesco.
‘We have invested in price to maintain our momentum and we are anticipating the second half could be more intensive not less.’ Tesco has also been attracting customers with its Aldi price match and Clubcard scheme, Murphy noted.
The chief executive, who took the reins in October 2020, added: ‘What we’re really pleased about, actually, is that the share gains are very broad based.’ He said a boom in at-home dining may be a ‘Covid hangover’ where Brits are inclined to stay indoors, or it may be ‘a money saving exercise’.
The latest share price rise took gains to 26 per cent this year. Tesco saw its shares tumble in 2013 and 2014 under former boss Philip Clarke as it was rocked by a string of disasters, including an accounting blunder and the closure of its US Fresh & Easy chain.
Derren Nathan, head of equity research at broker Hargreaves Lansdown said: ‘Tesco’s broad offer to customers at all price-points is helping it to drive sustained market share gains, something it has done in practically every month of the past two years. ‘Competition remains fierce and household budgets are under pressure, but Tesco is well placed to continue investing in value and quality.’
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