Though inflation is soaring and the next year promises significant uncertainty, Tesco at least for now can report a rise in profits to more than £2.6 billion from the year ending Feb. 28.
The retailer’s leaders warned of a potential dip next year, though they are projecting between £2.4bn and £2.6bn in profits – depending on how consumers shift their purchasing habits, how well they can offset inflation and how competitive they can be in terms of price positioning.
“Clearly, the external environment has become more challenging in recent months,” said Tesco CEO Ken Murphy. “Against a tough backdrop for our customers and with household budgets under pressure, we are laser-focused on keeping the cost of the weekly shop in check – working in close partnership with our suppliers, as well as doing everything we can to reduce our own costs.”
For consumers, who have been somewhat lured by Tesco’s ability to remain near level with deep discounters Lidl and Aldi on pricing for most than 650 items, that will be key. They are being hurt by a double whammy – the record rise in inflation and soaring energy bills. Tesco, too, must be concerned with the potential for their own costs to rise on energy and suppliers although the company is strengthening the former with several schemes aimed at reducing expenses. But will they and other big retailers such as Morrisons and Sainsbury’s need to do more if customers limit spending?
“Inflation is very real for everyone. It’s household expenses going up and finances stretched. It has been many years since we last saw living costs rise at the rate they are today,” Murphy said.
Still, he remained hopeful. A close look at the number shows a slight 0.4% rise in like-for-like sales year over year but a more than 8% spike since the pandemic began. It’s group sales were plus 3% while retail was up 35.8%. Tesco also reduced net debt by 12%.
“Our value perception is the strongest it has been for many years; we are building deeper relationships with more customers through the digitisation of Clubcard; and we are serving more customers wherever, whenever and however they want through more convenience stores, more than 100 new Click & Collect sites and the launch of Tesco Whoosh,” Murphy said.