Tesco sees sales growth after focus on value and rise in premium shoppers
Tesco has said a focus on value amid the continuing squeeze on shoppers’ budgets has paid off through a rise in half-year profits.
The UK’s biggest retailer raised its annual guidance on the back of market share gains versus major rivals over the six months to 24 August.
It also credited higher demand for its Finest premium ranges, which were almost 15% up on the same period a year ago.
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Total sales excluding fuel were 4% up at £31.5bn – though its UK like-for-like sales growth slowed in the second quarter.
Nevertheless, its preferred measure of retail adjusted operating profit was up 10% at £1.56bn.
The company said that it now expected the annual figure to come in about £2.9bn.
That was up from a £2.8bn prediction earlier that would have been flat on its previous financial year.
Tesco said its focus on delivering value on everyday goods, aided by its Clubcard loyalty and Aldi price-matching schemes, had driven volume growth over the period.
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It noted industry data showing its market share at its highest level since January 2022 at 27.8%.
Tesco said that Clubcard now covered 23 million households, claiming it was saving them up to £385 off their annual grocery bills.
It had cut prices, the company said, on more than 2,850 products over the six months by an average of about 9%.
Ken Murphy, the chief executive, said the company was “gearing up for a good Christmas” as he was hopeful over consumer demand.
He told investors: “We’ve been working really hard to offer our customers the best possible value, quality, and service and they are shopping more at Tesco as a result.
“We have lowered prices on thousands of lines, launched or improved over 860 products in partnership with our suppliers and growers, and our customer satisfaction scores continue to improve across a broad range of measures.
“The combination of price, quality and innovation means we are as competitive as we have ever been, and we have been the cheapest full-line grocer for nearly two years.”
Discounters have been eating into the market shares of the likes of Tesco, Sainsbury’s, Morrisons and Asda for almost 15 years.
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The cost of living crisis, sparked by the energy-driven surge in inflation in 2022, forced the big four to invest more in prices.
While Asda and Morrisons, which are now both privately owned, have struggled to keep pace, Sainsbury’s and Tesco’s market shares have proved more resilient.
The Sainsbury’s boss Simon Roberts recently warned that consumer confidence would be unlikely to pick up until the government sets out its tax and spending plans in the budget later this month and interest rates fall further.
Recent surveys have shown confidence plunged after Prime Minister Sir Keir Starmer’s warnings about the
state of the public finances and the likely need for tax increases.
Tesco shares rose by almost 2% at the open.
Zoe Gillespie, investment manager at RBC Brewin Dolphin, said: “Tesco’s strategy continues to deliver, with rising revenues and strong profits growth underpinned by increased market share – which now stands at nearly 28%.
“The supermarket group is performing very well in a highly competitive sector – particularly faced with inflationary pressures – built on a foundation of a simplified business model, disciplined capital structure, and investing for growth.
“With the outlook in Tesco’s markets potentially looking more favourable, the group is in a very strong position to protect its market share through its loyalty programmes – namely Tesco Clubcard – and high levels of customer satisfaction.
“The sale of its banking operation and ample free cashflow also provide Tesco with plenty of dry powder to make its next big move”, she concluded.
Some of the biggest US technology companies have pledged billions of pounds of investment to turbocharge Britain’s artificial intelligence (AI) industry, as the two countries announce a landmark technology deal.
Nvidia, Microsoft, Open AI and Google made a flurry of announcements to coincide with President Trump‘s state visit to the UK.
They include plans to build data centres and invest in AI research and engineering.
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Sir Keir Starmer described the agreement, which both leaders will sign over the coming days, as “a generational step change” in Britain’s relationship with the US.
The deal will see both countries cooperate on AI, quantum computing and nuclear energy, with investment in modular reactors revealed earlier this week.
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The prime minister said it was “shaping the futures of millions of people on both sides of the Atlantic, and delivering growth, security and opportunity up and down the country”.
The government said the deal would deliver thousands of jobs, with a new AI Growth Zone in the North East of England earmarked for 5,000 jobs.
The region will host a new data centre developed in partnership with ChatGPT developer OpenAI, the US chip giant Nvidia and the British data centre company Nscale. The UK government will supply energy for the project, which will be based in Blyth.
Jensen Huang, chief executive of Nvidia, who has previously drawn attention to Britain’s inadequate levels of digital infrastructure, said: “Today marks a historic chapter in US-United Kingdom technology collaboration.
“We are at the Big Bang of the AI era – and the United Kingdom stands in a Goldilocks position, where world-class talent, research and industry converge.”
Nvidia chief executive Jensen Huang. Pic: Reuters
The Blyth data centre is part of Stargate, Open AI’s infrastructure project to build large data centres across the US.
The company has also developed sites in Norway and the UAE. Nvidia, which provides the graphic processing chips (GPUs), expects to generate $20bn (£14.6bn) by the end of this year from “sovereign” deals with national governments over the coming years.
Sam Altman, OpenAI’s chief executive, said: “The UK has been a longstanding pioneer of AI, and is now home to world-class researchers, millions of ChatGPT users and a government that quickly recognised the potential of this technology.
“Stargate UK builds on this foundation to help accelerate scientific breakthroughs, improve productivity, and drive economic growth.”
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Microsoft also pledged £22bn, its largest ever investment in the UK, to expand data centres and construct the country’s largest AI supercomputer.
Meanwhile, Google owner Alphabet pledged £5bn to expand its data centres in Hertfordshire and fund its London-based subsidiary DeepMind, which uses AI to power cutting edge scientific research. The company was founded in Britain and acquired by Google in 2014.
Other investments include £1.5bn from AI cloud computing company CoreWeave and £1.4bn from Salesforce.
There are “no discussions around taxpayers’ money” to prop up Jaguar Land Rover’s (JLR) suppliers, according to the prime minister’s official spokesman, as the carmaker grapples a lengthening production shutdown following last month’s cyber attack.
JLR factories fell silent more than two weeks ago. While it is damaging for the company, it represents a perilous loss of business for the supply chain which has also been forced to send workers home.
Some have already lost their jobs.
Unions and the business and trade committee of MPs were among those to request the possibility of aid to prevent job losses and employers going bust as the disruption drags on.
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What happened?
It was revealed on 1 September that global production at JLR had been stopped following a cyber attack.
IT systems were taken offline by the company under efforts to limit penetration and damage.
The company appeared confident initially that manufacturing could resume but restart dates have been consistently put back.
What damage was done?
Jaguar Land Rover has said very little about the extent of the attack.
But it admitted last week that some data had been accessed. It gave no further details.
Who is to blame?
A criminal investigation is continuing.
A group of English-speaking hackers claimed responsibility for the JLR attack via a Telegram platform called Scattered Lapsus$ Hunters, an amalgamation of the names of hacking groups Scattered Spider, Lapsus$ and ShinyHunters.
Scattered Spider, a loose group of relatively young hackers, were behind the Co-Op, Harrods and M&S attacks earlier in the year.
It is widely believed that M&S paid a sum to regain control of its systems after it was targeted with ransomware though it has refused to confirm if this was the case.
How is this affecting JLR as a business?
The business was highly profitable last year but 2025 has seen new trade war challenges in addition to the cyber attack: File pic: Reuters
JLR typically produces about 1,000 vehicles a day.
Production staff are being paid but kept away from plants at Halewood on Merseyside, Solihull in the West Midlands, and its engine factory in Wolverhampton. It is the same story for workers at sites in Slovakia, China and India.
JLR revealed on Tuesday that production lines would now remain shut until at least 24 September.
David Bailey, professor of business economics at the Birmingham Business School, told the PA news agency: “The value of cars usually made at the sites means that around £1.7bn worth of vehicles will not have been produced, and I’d estimate that would have an initial impact of around £120m on profits.”
JLR achieved a pre-tax profit of £2.5bn for the financial year ending 31 March 2025, so should be able to absorb such a hit.
Sales and service operations continue as normal at its retail partners but the longer the disruption goes on, so do the risks to its inventories and bottom line.
Why does its supply chain need help?
JLR’s supply chain includes everything from components to paint. Pic: Reuters
This is the part of the operation that was always bound to suffer most in the event of a global JLR production shutdown.
No manufacturing means no need for parts.
The company usually depends on a ‘just in time’ supply chain to feed its factories and keep production lines running smoothly.
The Unite union has appealed for a COVID-style furlough scheme to prevent job losses and the risk of affected companies, often small or medium-sized firms, being forced out of business.
JLR’s operations are understood to directly support more than 100,000 jobs in the UK though that sum doubles through indirect roles.
The loss of any major supplier would risk further production delays once JLR’s IT systems are back online.
It is currently understood that the vast majority of directly affected workers remain in their jobs but have either been sent home or are on restricted tasks.
JLR suppliers Evtec, WHS Plastics, SurTec and OPmobility have had to temporarily lay off roughly 6,000 staff while a growing number of other firms are cutting workers, with temporary or contracted workers most likely to be affected.
What has the government said?
In addition to the remarks by the PM’s official spokesman, minister for industry Chris McDonald told Sky News: “We know this is a worrying time for those affected by this incident and our cyber experts are supporting JLR to help them resolve this issue as quickly as possible.
“I met the company today to discuss their plans to resolve this issue and get production started again, and we continue to discuss the impact on the supply chain.”
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