Tesco warns of Christmas price war as household budgets tighten

Tesco warned that the grocery sector in the UK faces an intense price battle in the period before Christmas, even as its profit expectations are raised throughout the year after its victory over the summer.

The largest supermarket group in the UK is now expecting annual profits of 3.1 billion pounds, and 100 million pounds higher than the previous guidance, after its decision to reduce prices on 6500 products by 9 % on average in more customers. Tesco said the grocery enlargement was “behind” the last industry rate of 4.9 %, according to WorldPanel numbers.

Ken Murphy, CEO of Tesco, admitted that competitors have already indicated their intention to compete strongly for prices. Earlier this year, ASDA pledged to publish a “big war box” to reduce costs.

Murphy said: “Some of our competitors have become very strong in explaining their intentions at the beginning of the year and they act.

He added that Tesco will be “vibrant in strong deals” during the next three months, but warned that shoppers were already showing signs of tension before the November budget.

Tesco increased 5.1 % in group sales to 33 billion pounds in the six months until August 23, with sales like the United Kingdom up to 4.9 %. Trading has been strengthened through the warm summer, which raised barbecue food sales, and through a transformation in consumer behavior, where customers buy more ready -made meals and fresh products for cooking at home instead of eating abroad.

Pre -tax profits decreased by 6.3 % to 1.3 billion pounds, reflecting the restructuring fees, separating the banking services department in Tesco, and its investments in reducing prices.

The retail seller said that it compensates for some financial pressure by providing the efficiency and prediction of artificial intelligence, using technology to better predict demand, reduce waste, and improve employment.

But Murphy criticized government policy on imposing taxes on business, pointing to 235 million pounds in national insurance contributions to employers and 90 million pounds from the new packaging tax this year.

“It is sufficient,” he said, “The ministers call for excluding retailers from the highest business rates in larger places and to provide promises with a more just system.

Despite warnings warning the supermarket on the horizon, Tesco remains confident in the celebration period, as you expect a strong demand for consumers on value -based deals.

With the presence of family budgets under stress and the construction of competitive density, Murphy insisted that Tesco will continue to focus on providing the best value to shoppers with long -term profit protection.