Tesco will post full-year profits at the lower end of its forecast range as cost inflation bites while the outlook remains uncertain, the UK’s leading supermarket said.
The retailer cut its adjusted operating profit range to £2.4-2.5 billion on Wednesday, down from a previous forecast of £2.4-2.6 billion.
However, it said retail free cash flow would be better-than-expected at £1.8bn and its banking unit’s operating profits were still forecast at £120m-£160m.
Tesco added that “significant uncertainties” remained in the external environment, particularly in relation to consumer behavior developments.
“As we look into the second half of the year, cost inflation remains significant and it is too early to predict how customers will adapt to ongoing changes in the marketplace,” said Chief Executive Ken Murphy.
He added that the company “has the right long-term strategy and will continue to align the needs of all of our stakeholders.”
The company also increased pay for store workers to £10.30 an hour, an increase of 20p, effective November. Talks with shop workers’ union Usdaw will start earlier than usual next year, reflecting a tight labor market.
Retail operating profit was £1.24 billion for the first half, down almost 10% year-on-year, with total sales excluding fuel up 3.1% to £28.2 billion.
Tesco shares have fallen more than 27 percent this year.
https://www.ft.com/content/a2f5900f-ca9b-45ad-8690-9ad90596a551 Tesco forecasts full-year profits at the lower end of the range