Tesco lifts profit forecast and says consumer confidence is resilient

Tesco has raised its annual profit forecast as the supermarket group said consumer confidence has remained relatively resilient this year despite ongoing geopolitical tensions “creating uncertainty”.

The UK’s biggest grocer said sales rose just 2% to £33.8bn in the first six months of its financial year but underlying profit was up 6.5% to £1.8bn.

Ken Murphy, the chief executive of Tesco, said growth had been helped by strong online sales, which were up 8%, and a 9% jump in revenues from its premium own-label Finest range.

The company added: “While consumer confidence has remained relatively resilient in the first half of the year, ongoing geopolitical tensions continue to create uncertainty and we remain focused on helping customers get the best possible value from their weekly shop.”

Earlier this year Tesco warned that profits could fall in the year ahead, citing increased uncertainty caused by the conflict in Iran, which began in late February. However, some economic indicators have suggested that the war has not yet had a significant impact: last week official estimates for UK growth in the second quarter were upgraded.

The company said it now expected to make underlying annual profits of between £3.15bn and £3.3bn. That represents an upgrade from its previous expectation of at least £3bn in profits but the bottom end of the range would still mark a fall from a year earlier.

Sales at established UK Tesco stores were up 1.5% as food sales motored, but the group’s Booker wholesale arm continued to have difficulties, with sales falling 2.6%.

The supermarket flagged that it was increasingly using artificial intelligence to help out across the business, including a meal planning assistant which was tested from April with 280,000 staff before being launched for customers in September.

It said AI was also helping to save costs by making in-store replenishment of stock more efficient and improving energy efficiency in its supermarkets.