Tesco raises its profit outlook on like-for-like sales growth of 1%

Tesco holds 27.8% of the UK grocery market, far ahead of Sainsbury's and Asda ^[11]. Its sales figures are therefore a fair proxy for what British households spend on food. Second-quarter growth came in 3.1 percentage points below the same quarter last year ^[20]. Britain was the stronger part of the group, with UK like-for-like sales up 1.5% against 1% overall ^[3]. That means Tesco's businesses outside Britain grew by less than 1% between them ^[21].

The reports do not split those figures into price and volume. We do not know yet whether the slowdown means fewer items in British baskets or a change in what those items cost.

The mix of sales points to shoppers choosing carefully. UK online sales rose 8.4% as average orders grew, and the Whoosh rapid-delivery service grew 37% ^[12]. Tesco said consumer confidence had been "relatively resilient" but that "ongoing political tensions continue to create uncertainty". It said this was turning into demand for a better-value weekly shop ^[15]. "Against an uncertain external backdrop, we have continued to invest in giving customers the very best value for money," Ken Murphy, the chief executive, said ^[6].

Profit grew far faster than sales. Adjusted operating profit rose 6.3% to £1.8bn ^[14], about six times the rate of like-for-like sales growth ^[23]. Pre-tax profit rose 11.5% to £1.5bn, according to City AM ^[18]. The bottom of the new full-year range, £3.15bn, is the midpoint of the old one ^[22]. In central Europe, where operating profit rose 38% to £63m, Murphy credited "volume growth, targeted promotions and better buying, supported by a strong contribution from our Save to Invest programme which helped to offset the impact of cost increases and a stronger competitive landscape" ^[19].

A business selling to the same households can get its plan wrong in either direction. Budgeting for a slump this quarter means pulling back from the premium and online lines, which is where Tesco's own figures show spending still rising ^[12][13]. Budgeting for last year's growth assumes the pressure on household budgets eases, and Tesco's chief executive is still talking about value. "Our focus remains on helping customers get the best possible value from their weekly shop," Murphy said ^[9].

One half-year at one grocer is enough to tighten this quarter's forecast. It is too little to support a view on household demand over several years. I think the figures support planning for low growth, with customers putting their money into value lines and into premium lines they judge worth the price. These results cover the 26 weeks to August 29, on Tesco sales of £33.8bn excluding fuel and VAT ^[4].