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Tesco sees 'encouraging signs' inflation is easing; reiterates profit guidance

Tesco sees 'encouraging signs' inflation is easing; reiterates profit guidance
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Tesco said on Friday there were "encouraging early signs" that inflation was starting to ease across the market as it reported a 9 per cent rise in underlying UK sales in its latest quarter.

The group, which has an over 27 per cent share of Britain's grocery market, also reiterated its guidance for broadly flat retail adjusted operating profit, its key profit measure, in the full 2023/24 year.


It made £2.49 billionin 2022/23.

CEO Ken Murphy said the supermarket group was conscious many of its customers continued to face significant cost-of-living pressures but said some relief could be on the way.

"There are encouraging early signs that inflation is starting to ease across the market," he said.

Prime Minister Rishi Sunak's key economic pledge to halve inflation in 2023 has been undermined by stubbornly high food inflation, which was running at over 19 per cent in April, according to the most recent official data. Grocery inflation eased slightly to 17.2 per cent in May, industry data showed.

Inflation is outstripping pay growth, while higher taxes and mortgage rates are also squeezing household finances.

Tesco is, however, benefiting from consumers looking to save money by cooking and entertaining at home rather than dining out, and from them prioritising essentials over more discretionary purchases.

It is having to balance the increased cost of products from suppliers with the need to be competitive to prevent shoppers switching to discounters Aldi and Lidl, while it is also facing higher staff wage costs.

A scheme to price-match Aldi on about 700 key items has helped as has the popularity of its ‘Clubcard Prices’ loyalty programme that offers reductions to members.

Tesco, whose shares have risen 18 per cent so far in 2023, has said it expects prices to rise in 2023 overall but with the rate of inflation declining through the year.

It has recently reduced the prices of some items which have seen the biggest rises, such as milk, butter, bread, pasta and vegetable oil.

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A whopping ninety-one per cent of respondents to a survey conducted by the Federation of Independent Retailers (the Fed) called for more police patrols on streets, while a similar number - 90 per cent - said that shoplifters should be handed harsher sentences.

Seven out of 10 respondents (72 per cent) said their stores had experienced shoplifting, break ins and damage to property, while they and their staff had been physically or verbally threatened.

Just under half of respondents (47 per cent) said they and their employees had been threatened or had suffered abuse and violence when asking for proof of age ahead of selling an age-restricted product.

Forty-four per cent reported that they and their staff had faced abuse or violence because they had refused to make a proxy sale – selling an age restricted product to a customer buying for a minor.

The results of the Fed’s survey came as new figures from the Office of National Statistics revealed that shoplifting was at a record high, with almost half a million offences recorded last year.

According to the ONS, 469,788 offences were logged by forces in the year to June 2024 – a 29 per cent increase on the previous 12 months.

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“Inadequate responses from the police and a slap on the wrist for offenders means that shoplifting is soaring, and offenders are becoming more aggressive and brazen,” said Fed National President Mo Razzaq.

“From the responses we received, it is clear that real action is needed by police, by courts and by the government to stem the overwhelming tide of crime against retailers and their staff. Everyone deserves to feel safe at work and for their businesses to be protected against criminals.

“Fed members are also sending a clear message that one of the catalysts for verbal and physical abuse in stores is asking for proof of age before selling an age restricted product. If the government presses ahead with its plans to phase out smoking and vaping through a progressive ban to gradually end the sale of tobacco products across the country, independent retailers will be subject to even greater levels of violence, abuse and theft.”

Calling for action from the government and not just words, Mr Razzaq continued: “Without effective deterrent, criminals and opportunistic members of the public will continue to commit crimes.”

According to Ministry of Justice statistics, during the year to March 2024, 431 fines were handed out for retail theft under £100, while Home Office statistics for the same period show that 2,252 cautions were accepted for shoplifting.