Tesco will generate full-year profits towards the lower end of its forecast range as cost inflation bites while the outlook remains uncertain, the UK’s leading supermarket has said.
The retailer on Wednesday nudged its range for adjusted operating profit down to between £2.4bn and £2.5bn, down from an earlier forecast of £2.4bn-£2.6bn.
However, it said that retail free cash flow would be better than expected at £1.8bn and operating profits at its banking unit were still forecast to be £120mn-£160mn.
Tesco added that “significant uncertainties” remained in the external environment, most notably in how consumer behaviour evolved.
“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,” said chief executive Ken Murphy.
He added that the company had “the right long-term strategy and will continue to balance the needs of all of our stakeholders”.
The company also increased pay for store staff to £10.30 per hour, a rise of 20p, with effect from November. Talks with the shopworkers’ union Usdaw will start earlier than usual next year, reflecting a tight labour market.
First-half retail operating profit was £1.24bn, down almost 10 per cent from last year, with total sales excluding fuel rising 3.1 per cent to £28.2bn.
Shares in Tesco have declined more than 27 per cent this year.
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