Tesco lifts profit outlook as price cuts boost sales and F&F online launch drives clothing growth

Tesco has raised its annual earnings expectations as it said good weather and efforts to keep its prices low in a competitive market had boosted trading.

The UK’s biggest supermarket reported an increase in sales over the first half of the year.

UK sales grew by 4.9% compared like-for-like with the same period last year, it said.

The group’s adjusted operating profit also rose by 1.6% to £1.67 billion for the half-year.

Tesco said it now expects underlying earnings for the full year of between £2.9 billion and £3.1 billion, up from its previous guidance range of between £2.7 billion and £3 billion.

Warmer weather and shoppers cashing in on lower prices helped offset the cost of the supermarket’s investments into its ranges and elevated business costs including higher taxes.

The continued expansion of Tesco's digital ecosystem - underscored by the recent launch of F&F online - has significantly enhanced the accessibility of its clothing range. This development complements the Tesco Marketplace and has played a key role in the supermarket’s broader success.

Launched in May, F&F online marked a major milestone for Tesco’s clothing division, bringing its affordable fashion range to a wider audience across the UK and strengthening its position in the digital retail space.

Tesco’s Chief Executive Ken Murphy said: "I am pleased with our first half performance, which builds on already strong momentum. Our market share gains in the UK are a particular highlight and reflect the decisive action we took at the start of the year to further invest in value, quality and service. The extension of our savings programme is helping offset new operating cost inflation, including increased National Insurance and other regulatory costs. Sales have grown across all our businesses, with customer satisfaction scores improving once again.

"We are continuing to invest in our long-term growth, leveraging technology to drive more personalised engagement through Clubcard and deeper retail media reach across channels and suppliers.

"Our online business is going from strength-to-strength, enhanced by the recent launch of F&F online and continued growth in Whoosh, our rapid delivery service.

"Competitive intensity remains high, and with continued pressure on household budgets, we remain committed to ensuring customers get the best possible value by shopping at Tesco. As we continue to invest, we are creating sustainable value for all our stakeholders. Our colleagues are central to everything we do, and I would like to thank them all for the role they have each played in delivering for our customers."