Market News

Tesco warns on profit as consumers count pennies

Story Highlights

Tesco is facing increased competition from discounters such as Aldi and Lidl as the cost-of-living crisis bites.

Britain’s biggest supermarket chain Tesco (GB:TSCO) has warned that profits could hit the lower end of its forecast as the cost-of-living crisis bites in Britain. 

Tesco said that retail adjusted operating profit would be £2.5-£2.5 billion for the full year, after previous forecasts suggested a figure of £2.6 billion. 

Tesco faces losing market share to discounters Aldi and Lidl due to rising prices in Britain, according to a report by Kantar. 

Tesco share buyback

The company reiterated its commitment to buying back shares – saying it had bought back £450m of shares since April, and committing to buy a further £300m over coming months. 

Ken Murphy, Chief Executive of Tesco said, “We know our customers are facing a tough time and watching every penny to make ends meet.  That’s why we’re working relentlessly to keep the cost of the weekly shop as affordable as possible, with our powerful combination of Aldi Price Match, Low Everyday Prices and Clubcard Prices, together covering more than 8,000 products, week in, week out.  

“We’re also investing significantly in our colleagues, with a further boost to pay announced today for our UK stores.  I want to say a big thank you to the whole Tesco team, and our supplier partners – together, we have built a more resilient, consistent business that’s well set up for the future.”

Tesco results

Tesco is an iconic supermarket in the UK, and is one the leading retailers in the world, supplying groceries, clothing, and other consumer goods.

Earlier this year, sales were recovering and surpassing the pre-COVID numbers. 

In its first quarter trading update for the fiscal year 2022–23, the company posted growth of almost 10% in its total retail sales, as compared to the fiscal year 2019–20. The number was 2% higher than sales from last year.

Tesco also has the advantage of geographical diversification. Central Europe had a 9% growth in its revenues from last year. This reflects that the company is not dependent only on UK sales.

Is Tesco buy or sell?

According to TipRanks’ rating consensus, Tesco stock has a Strong Buy rating, based on six Buy and two Hold recommendations.

The TSCO target price is 300.14p, with an upside potential of 47.2%.

Conclusion

Despite these current challenges, the retail giant is well-placed to weather the current economic storm.

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