Retailer Tesco has forecast full-year core profit to be around the lower end of its previous guidance, saying there were significant uncertainties over the macro outlook.
The group, which has a 27% share of Britain's grocery market, said it now expected full 2022-23 year retail adjusted operating profit of between £2.4 billion (€2.76 billion) and £2.5 billion (€2.87 billion). It was previously forecasting £2.4 billion to £2.6 billion, down from the £2.65 billion made in 2021-22.
'Significant uncertainties in the external environment still exist, most notably how consumer behaviour continues to evolve,' it said.
Tesco did, however, upgrade its expectation for full-year retail free cash flow to be at least £1.8 billion. It forecast Tesco Bank adjusted operating profit of £120 million to £160 million.
UK Consumer Confidence
Confidence levels among Britain's consumers sank to a record low last month as they struggle with the accelerating cost of living, even before the government's mini-budget sowed turmoil in the mortgage market, leading to warnings of a sharp drop in house prices.
Wages are failing to keep pace with inflation that was 9.9% in August. Consumers are buying less per shopping trip and trading down to cheaper own-label products.
Tesco reported first-half retail adjusted operating profit of £1.248 billion – down 10% from a pandemic boosted £1.386 billion last year and just below analysts' average forecast of £1.251 billion.
First-half group sales rose 3.1% to £28.178 billion (€32.38 billion).
UK like-for-like sales rose 0.7%, having fallen 1.5% in the first quarter.
"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," commented Ken Murphy, chief executive.
"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. "