Britons to have ‘marginally healthier’ Christmas with less alcohol, Tesco says

Dan Coatsworth, head of markets at AJ Bell, says Tesco’s raft of new ideas are repeaing their rewards after the company revealed higher sales for the first half of the year and increased its annual profit outlook.

He said: “There is a lot to like about Tesco’s results. It’s taken a lot of hard work to become the UK market leader, and a lot of effort now goes into defending its market share.

“Tesco’s half-year results suggest it isn’t short of an idea or three to stay on top. New product launches, more personalised offers, and meal planning assistants are just some of the initiatives helping to keep shoppers interested and money going into the till.

“A high oil price creates a challenging backdrop, particularly as consumers are facing a spike in energy costs from January when the energy price goes up by a potential 25 per cent to 30 per cent.

“There is a lot of talk around whether we’re facing another cost-of-living crisis, and the government is expected to announce measures to help households at the Budget later this month.

“When it costs more to fill up the car, to do the weekly food shop, and to pay for other essentials, the natural response from shoppers is to make cutbacks. This suggests that trading in the run-up to Christmas could be more challenging for the likes of Tesco.

“However, the grocer has upgraded its profit forecast in a show of confidence. Investors are loving the news, helping the shares buck a red day for markets.

“Tesco has been clever in laying out its stall. It has taken the dual-pronged approach of cutting prices where possible to appeal to the cost-conscious shopper and stop Aldi and Lidl eating its lunch.

“At the same time, Tesco has increased its range of premium items under the Finest label, thereby striking a chord with individuals who can afford fancier foods. That’s helped to win customers from Waitrose.

“Admittedly, Sainsbury’s is following a similar strategy but there remains a wide enough gap in terms of market share for Tesco not to sweat too much.

“Tesco’s strategy of having something for everyone also extends to the way in which customers can buy from the grocer. In-store is the dominant channel, yet the Whoosh rapid home delivery service is proving to be a bigger success than some people originally thought it would be.

“Tesco’s share of the online grocery market continues to grow fast, now at 36.7 per cent in the UK. Even the wholesale arm, Booker, remains relevant even if it isn’t growing as fast as the rest of the business.”