Tesco chief executive Ken Murphy has raised the prospect of a less boozy Christmas due to shoppers making healthier choices, as the UK’s largest supermarket chain lifted its full-year profit outlook.
“I do think it could be a marginally healthier Christmas,” Murphy told reporters on Thursday. “We think low- and no-alcohol will see strong growth,” he added, although shoppers typically “do love to indulge” during the festive season.
Murphy said customers were increasingly choosing healthier meals and eating smaller portion sizes with more protein and fibre, as well as opting for healthier desserts and low- and no-alcohol drinks. This was part of a broader shift towards healthier living, he added, rather than simply a consequence of growing numbers of people using weight-loss drugs.
His comments came as the FTSE 100 company said it expected to generate profits of between £3.15bn and £3.3bn in the year to the end of February, compared with an April forecast of £3bn to £3.3bn. Shares rose 3.6 per cent in morning trading on Thursday.
Tesco’s UK like-for-like sales rose 1.5 per cent in the first half, a sharp slowdown from 4.9 per cent growth in the same period last year. Group like-for-like sales increased 1 per cent, while total revenue rose 3.7 per cent to £37.3bn. Adjusted operating profit climbed 6.5 per cent to £1.8bn.
Tesco has extended its market lead over rivals in recent years by cutting prices and matching Aldi on hundreds of products, while also benefiting from the struggles of debt-laden rivals Asda and Morrisons. However, it has surrendered some of those gains in recent months.
Murphy said Tesco expected to have lost some market share over the summer, following strong gains the previous year, adding that “wasn’t a surprise” to management. It still commands 27.8 per cent share of UK food sales according to data from Worldpanel by Numerator.
Competition has intensified in the UK grocery market this year as consumers have become wary of rising costs because of global issues such as the war in Iran·. But Murphy said customers had been relatively resilient, adding this partly reflected people dealing with years of external shocks. “They have, to a certain extent, become used to it, and they deal with it, and they get on with life.”
He said that food inflation was “well below wage inflation” at the half year, helped by strong competition, but declined to predict the direction of future prices.
Asked about supermarket consolidation following the aborted deal talks in February between rivals Sainsbury’s and Morrisons, Murphy said “we don’t dwell too much on that”.