Tesco raises pay despite profit hit

Tesco has seen its profits tumble in the first half of the year, with profit before tax plummeting by 64% to £413m, as the group contends with “significant” cost inflation and changing consumer habits. 

Nonetheless, revenues rose by 6.7% to £32.5bn in the period, while the group announced it would also raise hourly pay for the second time this year.  

In its latest update, Tesco said it now expects full-year profits of between £2.4bn and £2.5bn, the lower end of its previous guidance of £2.4bn to £2.6bn. It comes as the group warned that post-pandemic normalisation has been compounded by the cost-of-living crisis and its effects on customer behaviour.  

Despite this, the group maintained a “solid” UK market share performance, in line with expectations, noting that a “powerful” combination of Aldi Price Match, Low Everyday Prices and Clubcard Prices has helped ease cost-of-living pressures for customers.

In a separate announcement, the group unveiled a “vast” new price-lock commitment that will see it freeze the prices of more than 1,000 everyday products until 2023. The products are all included within its Low Everyday Prices campaign.

The supermarket giant also confirmed that employees will receive a further pay boost in the second hourly-pay increase this year, with a “major investment” that aims to help employees navigate the cost of living crisis. 

From 13 November 2022, the basic hourly rate of pay in stores will increase by a further 20p to £10.30 (or £10.98 in London). This equates to an hourly increase of nearly 8% this year.

It is also doubling its Colleague Clubcard discount to 20% during the key Christmas shopping period from 13-19 December.

Ken Murphy, CEO, said: “We know our customers are facing a tough time and watching every penny to make ends meet.  That’s why we’re working relentlessly to keep the cost of the weekly shop as affordable as possible, with our powerful combination of Aldi Price Match, Low Everyday Prices and Clubcard Prices, together covering more than 8,000 products, week in, week out.  

“We’re also investing significantly in our colleagues, with a further boost to pay announced today for our UK stores.  I want to say a big thank you to the whole Tesco team, and our supplier partners – together, we have built a more resilient, consistent business that’s well set up for the future.”

He added: “By staying laser-focused on value and sticking to our strategy of inflating a little bit less and a little bit later, our price position has got even more competitive.  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.  Despite these uncertainties, our priorities are clear.  We have the right long-term strategy and we will continue to balance the needs of all of our stakeholders.  Most importantly, we will stay focused on delivering value for our customers and supporting them in every way we can.”