UK supermarket Tesco lifts profit outlook on competitive prices

Increased competition in the UK market had led Tesco in April to lower its profit guidance.

"Competitive intensity remains elevated," the company said.

However, it added "a better-than-expected customer response to our actions and the benefit of an extended period of good weather have helped offset the cost of our investments."

Tesco uses lower price offers to attract customers in the face of competition, such as matching prices of German-owned discounter Aldi.

"The steps we have taken to keep prices down for customers have improved our price position relative to the market," said chief executive Ken Murphy.

Net profit fell more than nine percent in its first half to £950 million from the same period a year earlier, while revenue grew 3.6 percent to around £36 billion. 

It saw double-digit growth in sales of its premium 'Finest' range of products.  

"Tesco's broad offer to customers at all price-points is helping it to drive sustained market share gains," said Derren Nathan, head of equity research at Hargreaves Lansdown.

"Competition remains fierce and household budgets are under pressure, but Tesco is well placed to continue investing in value and quality," he added.

The company is on track to deliver £500 million of savings for its 2025/2026 financial year to help offset costs of increased higher businesses taxes and a higher minimum wage, brought in this year by the UK's Labour government. 

Business have warned that these increases will raise the costs of employing people. 

ajb/lth