Tesco has warned that profits could fall back in the year ahead amid “increased uncertainty caused by the conflict in the Middle East”.
The warning came after the UK’s biggest supermarket hit its highest share of the market in a decade.
It revealed profits had risen 8.5% to £2.4bn in the year to 28 February as sales rose by 4.3% to £66.6bn, including strong growth in the UK.
The retailer paid shop floor, distribution workers and other frontline staff a £65m “special performance award” in light of the results, while shareholders have received £937m in dividends during the year.
However, the company said it had “widened” its guidance on profits for the year ahead to £3bn to £3.3bn, adding: “Much will depend upon the duration of the conflict and in particular, the potential implications for UK households and the economy more broadly.”
Ken Murphy, the Tesco chief executive, said it had won over more shoppers as “despite cost pressures from new regulation, we have increased our investments in keeping prices low, further improving quality and offering even better service”.
He said the UK had experienced an “increase in competitive intensity”, in the face of which Tesco had ensured more than 10,000 of its products were cheaper at the year end than at the start, despite grocery price inflation across the market.
He said the supermarket chain was “committed to doing whatever we can to help keep down the cost of the weekly shop, and with the conflict in the Middle East creating further uncertainty for consumers and the economy more broadly, that commitment matters more than ever”.
Tesco said it aimed to make £500m in new savings in the year ahead. That will include more use of AI in helping work out when and how to mark down prices, as well as AI-led finance tools.