Tesco warns of hit to profits as price war mounts

(Sharecast News) - Tesco warned on Thursday that profits in the current year could be squeezed, as competition from rivals ramps up. The UK's biggest grocer said group sales in the year to February 2025, excluding VAT and fuel, had jumped 3.5% to £63.64bn.

Group like-for-like sales were up 3.1%, including a 4% jump in the UK. Tesco's wholesale business Booker saw sales ease 1.8% on the same basis, dragged lower by the ongoing decline in the tobacco market.

Group adjusted operating profits soared 10.6%, at £3.13bn, of which retail adjusted operating profits rose 7.7% at £2.97bn.

However, looking to the current year, the supermarket chain adopted a more cautious tone, following a "further increase in the competitive intensity of the UK market".

It continued: "We are committed to ensuring that customers get the best value in the market by shopping at Tesco, and we see further opportunities to protect and strengthen our competitiveness."

As a result, it now expects group adjusted operating profit to come in between £2.7bn and £3.0bn in the 2025/26 full year.

Last month, rival Asda said it was willing to take a hit to profits as it shifts to a lower price point, as it looks to bolster is weakening market share. Discounters Aldi and Lidl also continue to build their own market share, although all three grocers are considerably smaller than Tesco.

The sector as a whole is also facing higher costs this year, including a rise in the National Living Wage, employer National Insurance contributions and higher input prices.

Ken Murphy, chief executive, said: "Building on our strong financial performance, robust balance sheet and positive momentum, we are setting ourselves up for the year ahead with the flexibility to continue to win in a highly competitive market.

"Despite inflationary headwinds, we are committed to ensuring customers get the best possible value by shopping at Tesco."