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Tesco accelerates price cuts amid easing inflation and rising profits

October 3, 2024

Tesco is lowering prices “as quickly as possible,” according to its chief executive, in the latest sign that inflationary pressures in the UK may be subsiding.

The country’s largest supermarket has cut prices on thousands of products as the cost inflation it faces eases. The retailer is continuing to work closely with suppliers to pass these savings on to customers.

Tesco’s focus on competitive pricing has helped it maintain its status as the most affordable of the traditional supermarkets for almost two years. Chief Executive Ken Murphy stated, “The combination of price, quality, and innovation means we are as competitive as we have ever been.”

Recent industry data reflects Tesco’s growing dominance. Kantar’s latest figures show Tesco holding 27.8% of the UK grocery market, up from 27% a year ago. This is the retailer’s strongest position since January 2022.

Looking ahead to the Christmas trading period, Murphy said the company is “in good shape” and remains optimistic. The supermarket raised its profit forecast for the year, now expecting to achieve £2.9bn in retail adjusted operating profit, up from an earlier estimate of at least £2.8bn.

Tesco reported a strong first half of the year, with pre-tax profits increasing by nearly 20% to £1.39bn, and revenues up 4% to £31.5bn. A notable driver of this growth has been Tesco’s premium “Finest” range, which saw more than 20 million customers in the first half of the year.

Additionally, Tesco’s Clubcard loyalty scheme continues to gain traction, with more than 23 million households now signed up. The supermarket is exploring ways to evolve the scheme further, including using data to encourage healthier choices among shoppers.

Murphy recently suggested that in the future, the Clubcard could help nudge customers towards healthier food options by alerting them when their shopping habits include excessive levels of unhealthy ingredients, such as sodium. “I can see it nudging you,” he said, explaining that the data could prompt customers to make healthier substitutions in their baskets.

As Tesco approaches the busy festive season, its focus on price competitiveness, quality, and customer loyalty looks set to continue driving its market leadership.