Tesco is predicting lower profits

It’s as a supermarket price war mounts

Tesco has forecast lower profit this year than last amid a mounting price war among the UK’s major supermarkets.

The grocery giant said it expects to see adjusted operating profit of between £2.7 billion and £3.0 billion, compared with £3.1 billion in the most recent financial year.

It said on Thursday: “In the last few months, we have seen a further increase in the competitive intensity of the UK market.

“We are committed to ensuring that customers get the best value in the market by shopping at Tesco and we see further opportunities to protect and strengthen our competitiveness.

“We are therefore providing guidance that gives us flexibility and firepower to be able to respond to current market conditions.”

Britain’s supermarkets have been engaged in the early stages of a price war that has already wiped billions off their stock market values in recent months.

It came after comments by Asda chairman Allan Leighton, who in March promised the company’s biggest price cuts for 25 years to make it more competitive.

Nonetheless, Tesco’s forecast came as it reported bumper sales for the most recent financial year, up 3.5% to £63.6 billion. Profit before tax was down 3.2% at £2.2 billion.

And the supermarket said it increased its market share across the UK to 28.3%, its highest point since 2016.

The big grocery retailers have complained of tax hikes and increases in the minimum wage in recent months, brought in by the Labour Government, which have made it more expensive to employ people.

Tesco was one of a group of companies warning of price rises and inflation as a result of the announcement late last year.

And in January, it announced 400 job cuts across both stores and head office as part of plans to “simplify” the business.

Chief executive Ken Murphy said on Thursday: “Despite inflationary headwinds, we are committed to ensuring customers get the best possible value by shopping at Tesco, and see further opportunities to strengthen our competitiveness.”