Tesco is set to report a fall in profits this week as it battles to attract cash-strapped shoppers struggling with soaring grocery bills.
Analysts estimate that Britain’s biggest supermarket made profits of £1.8 billion last year – down from £2.2 billion in 2021 – despite sales that are expected to have risen by about 10 per cent. This is partly because the grocer is thought to have made less profit on each sale.
Battle: Analysts estimate that Tesco made profits of £1.8 billion last year – down from £2.2 billion in 2021
Profit margins for retailers across the board have been squeezed by the surge in costs. Food price inflation is running at more than 18 per cent – its highest level since 1978.
Supermarkets have been accused of using energy costs to pass on even bigger price hikes to shoppers.
Analysts reckon that Tesco will use its clout to restore margins to pre-pandemic levels of more than 4 per cent by raising its shelf prices faster than the costs it faces.
Meanwhile shoppers – also contending with sky-high energy bills – have increasingly tried to save money by turning to cheaper chains such as Aldi and Lidl.
But Tesco has broadly held up well against the onslaught from the two German-owned discounters.
It had a 25.9 per cent share of the UK grocery market in the 12 weeks to March 25, according to the latest figures from data firm NielsenIQ, while Aldi and Lidl between them had 22.1 per cent. This was up from 19.8 per cent the previous year.
Mike Watkins, at NIQ, said he thought the combined market share of the discounters would ‘stabilise’ at about 23 per cent, adding: ‘There is no realistic possibility of discounter combined market share overtaking that of Tesco.’
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