Tesco freezes the price of 1,000 everyday products until 2023
It is in response to a change in shopping patterns with more people buying own-branded items, making more shopping trips and buying fewer products, and buying more frozen products.
The retailer says it knows customers are facing tough times and “watching every penny to make ends meet”.
Alongside freezing the cost of items, the supermarket giant is also continuing its ‘Aldi Price Match’ alongside discounts for Clubcard holders, it confirmed in its interim results.
Shop sees profits drop
Tesco also reported a fall in profits. In the six months to August, underlying operating profits in its retail division fell by 9.8% to £1.3bn.
Yet sales across the whole Tesco group, excluding its fuel business, increased by 3.5% to £28.2bn. It says it expects annual earnings to be at the lower end of guidance and between £2.4bn and £2.5bn.
Workers at Tesco will also see a boost to pay. The hourly rate paid will rise by 20p, to £10.30 (£10.98 in London) which is a rise of 8% this year.
Changes to shopping habits
The supermarket also noted that sales for 2022 were competing with an especially strong year in 2021, shortly after the Covid pandemic lockdowns ended.
It said the results reflect the impact of things going back to normal when it comes to food shopping. This follows a period in 2020 and 2021 when there was unprecedented demand for grocery shopping during the lockdowns.
The cost-of-living crisis has seen prices rise significantly. Food and energy are two areas where prices have shot up leading to inflation currently sitting at 9.9% for August.
The retailer said customers had already started spending less money on grocery shopping and this was also reflected in its results. It said customers were taking steps to manage the pressure on their household budgets by choosing more own-branded goods.
Ken Murphy, Chief Executive, said: “We know our customers are facing a tough time and watching every penny to make ends meet.
“Customers are seeking out the quality and value of our own brand ranges as they work to make their money go further, whether they are switching from branded products, between categories or cutting back on eating out.
“As we look to the second half, cost inflation remains significant, and it is too early to predict how customers will adapt to ongoing changes in the market.”
‘Supermarkets are no strangers to cost-of-living pressures’
Matt Britzman, Equity Analyst at Hargreaves Lansdown, commented: “Supermarkets are no strangers to dealing with cost-of-living pressures, there’s been an all-out price war in the industry for some years now.
“Amongst the larger players, Tesco’s arguably been one of the standout businesses in the battle against low-cost outfits but pressures on consumer spending can only build for so long before something must give.
“Though, despite significant challenges, there’s plenty of positives to take away from today’s results and markets have looked favourably on results in early trading.”