Tesco boss Ken Murphy said the supermarket was gaining market share as shoppers preferred to buy more from the retailer. Photo: PARSONS MEDIA/via REUTERS < p>Tesco welcomed a “significant” fall in inflation for millions of shoppers as the UK's biggest supermarket reported profits almost tripled last year.
Soaring sales led to profits of £2.3 billion for the year to February. in 2024, up from £882 million in the previous 12 months.
Following the jump, chief executive Ken Murphy responded to accusations of speculation by saying Tesco leads rivals in terms of price competitiveness.
Tesco shares are up more than 6% since the latest update.
Tesco's success follows a period of intense pressure on supermarkets amid the cost of living crisis as incomes struggled under the burden of rising food prices and pressure on shoppers.
However, Mr Murphy signaled that Britain had recently turned the corner in its fight against inflation, saying price rises had “slowed significantly, particularly in the second half of the year”.
He pointed to the latest Kantar data. showing that grocery store inflation is at its lowest level in two years. in March, falling to 4.5% after 17.5% last year.
Mr Murphy said: “This represents a massive drop and we are operating well below that level. The inflation rate our consumers face is lower.”
He said Tesco expects inflation to stabilize at low single digit levels before the end of the year. “That's our planning assumption.”
This will increase hopes that the UK can start cutting interest rates in the coming months, which will support mortgage holders.
Rates are currently at at the highest level in almost 16 years as Bank of England policymakers aim to keep inflation under control.
Economists recently noted that inflation was likely to fall below the Bank's 2% target in the coming months, helped by lower energy bills.
Mr Murphy said commodity prices were also falling. as the impact of inflation “gradually declined throughout the year.”
This has led to a significant number of products falling in price, including olive oil.
However, he warned that inflation remained high on items such as coffee, chocolate and potatoes.
To counter ongoing pressure, Tesco is preparing to cut prices further, having already cut 4,000 items in the last 12 months.
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Mr Murphy said he wanted Tesco to remain the cheapest traditional grocery store in the face of increasing price competition from rivals: “I expect it will be another highly competitive and very busy year.”
The push for even deeper price cuts would be a rebuff to union bosses who have accused supermarkets of not doing enough to help households.
Unite general secretary Sharon Graham criticized Tesco's results on Wednesday, saying: “Tesco is raking in mountains of money while families struggle to put food on the table due to sky-high prices.”
The union said “many companies have exploited the cost of living crisis to make excessive profits”, adding: “There is an epidemic of profiteering in our economy – the government has failed to act and failed to curb it.”
However, Tesco rejected the claims as management said the grocer had taken a “balanced approach” to cutting prices while rewarding staff and investing in its operations.
This includes providing to its employees £70 million thank you payment.
Unite general secretary Sharon Graham said Tesco was raking in mountains of money. Photo: Jacob King/PA Wire
This follows the period following Russia's invasion of Ukraine when supermarket profits fell as higher food prices squeezed profits.
Competition & The Markets Authority (CMA) subsequently launched an investigation into profiteering but found no indication that supermarkets were engaging in “greedy inflation”.
As a result of the investigation, the CMA found that supermarket profits had fallen from an average of 3.2 % in 2022 to 1.8% in 2023.
Following this decision, the CMA has instead focused its attention on large food and drink suppliers, which are accused of making profits of more than 15%.
Tesco chief financial officer Imran Nawaz said profits had now “largely recovered to previous levels”. – pandemic level.”
Despite this, the retailer plans to save £500 million next year by improving efficiency by introducing more artificial intelligence.
Profits are expected to rise marginally over the next 12 months after Mr. n Navez, had a “really strong year”.
Tesco has been extending its advantage over supermarket rivals recently as it attracts more customers through its loyalty card scheme.
The number of households with a Tesco Clubcard has risen by more than 6% in the past year to a record high. 22 million
According to Kantar, the increase in market share means Tesco has strengthened its position as the UK's largest supermarket, with more than 27% of the market.
Its next closest competitor is Sainsbury' s. with a share of 15.2%, while Asda's share fell to 13.8%.
Mr Murphy said: “We have never been cheaper than Asda in our history, but we have remained that way consistently for 16 months. We have failed to make a profit from premium retailers, but we have been doing it again for over 12 months.”
He said Tesco had given shareholders a “reasonable return” and was reinvesting in the company.
Mr Murphy added: “We think this is a business that is gaining positive momentum from which every stakeholder can benefit. We pay significantly more taxes than we did three years ago. It's all positive for the country and for the economy, and so we're very proud of it.”
Mr Murphy shrugged off the prospect of increased competition from higher-priced rival Waitrose, despite its former British boss. Jason Tarry has been appointed as the new chairman of the John Lewis Partnership.
He said Tesco was looking to attract more customers, including middle-class shoppers looking for premium products at reasonable prices.
Mr Murphy said: “I don't think any changes in the operations of any of our competitors will affect this.”
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