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Supermarket giant Tesco has upped its profit guidance following another strong period of trading for the UK’s biggest grocer.
Tesco increased its retail adjusted operating profit guidance to £2.9bn, from £2.8bn, after it “delivered volume growth ahead of expectations”.
Continuing sales at the grocer grew 3.5 per cent in the 26 weeks ended 24 August 2024, the first half of its fiscal year, up from £30.4m in the first half of 2023 to £31.5m in 2024.
Statutory revenue grew 2.9 per cent to £34.7m, while operating profit grew 13 per cent to £1.6bn, “primarily driven by retail operations,” the company said.
Profit before tax grew by just under 20 per cent, from £1.2bn to £1.4bn.
Adjusted diluted earnings per share for the period jumped 23.7 per cent to 14.45p.
The company hiked its interim dividend per share by 10.4 per cent to 4.25p.
Tesco is the biggest grocer in the UK in terms of market share, with 27.8 per cent of the market according to the latest Kantar grocery figures. Its share has risen 0.6 per cent from last year.
Chief executive Ken Murphy said: “We’ve been working really hard to offer our customers the best possible value, quality, and service and they are shopping more at Tesco as a result.
“We have lowered prices on thousands of lines, launched or improved over 860 products in partnership with our suppliers and growers, and our customer satisfaction scores continue to improve across a broad range of measures… we are as competitive as we have ever been.”
“We are in good shape, with volume growth delivering strong financial performance. Our strong momentum allows us to continue to focus on value, quality, innovation, and the broader customer experience, whilst investing in growth opportunities in a disciplined, returns-focused way.”
Earlier this month, Murphy made headlines when he suggested Tesco would use AI to nudge customers into changing their shopping habits via its Clubcard programme.
Tesco said sales penetration of its clubcard was up in all markets year on year, and the company added that there was already further personalisation in the mix, with 4.9m customers receiving ‘Clubcard Challenges’ tailored to their shopping habits.
Matt Dorset, equity analyst at Quilter Cheviot: “Tesco’s results have exceeded expectations, showcasing solid performance across the board.
“Tesco’s commitment to maintaining strong consumer relationships is evident in their recent price cuts on over 860 products, which have contributed to improved customer satisfaction.”
AJ Bell investment director Russ Mould said: “For a company in such a competitive market and with an already dominant market position to be taking share is quite the feat and that’s something Tesco has achieved in the first half of its financial year.
“The supermarket also demonstrated its confidence in its future prospects heading into the crucial Christmas trading period with a healthy increase in the dividend. This is underpinned by strong cash generation, which is also enabling Tesco to invest in the business and compete effectively on price.
“Its focus on value is clearly getting customers through the doors and the tills ringing and, alongside measures like its Clubcard discounted prices, should help to engender loyalty. A fairly astonishing 23 million households now have a Clubcard membership.
“This is why the report on CMA findings into supermarkets’ loyalty pricing practices will be closely monitored by Tesco and its shareholders when it comes out next month. Though the noises to date suggest this shouldn’t pose a major threat.
“The challenge put forward by the German discounters hasn’t gone away, but Tesco has managed to absorb it in a way which other mid-market groceries outfits like Asda and Morrisons have found more difficult. The growing appetite for its Finest range also suggests it may be starting to appeal to shoppers who previously would have frequented higher end rivals.”