Tesco has warned that profits could come under pressure this year as rising geopolitical tensions cloud the outlook for retailers.
The UK’s largest supermarket chain reported adjusted operating profits of £3.15bn for the year to February 28, narrowly up from £3.13bn the previous year, alongside a 4.6% rise in sales (excluding VAT and fuel) to £66.6bn.
However, the group struck a more cautious tone for the year ahead, guiding that profits are likely to fall within a broad £3bn to £3.3bn range. It said the unusually wide forecast reflects heightened uncertainty linked to the war in Iran and its knock-on effects on energy prices and consumer confidence.
The warning underscores growing concern across the retail sector that external shocks could squeeze margins just as businesses begin to recover from a prolonged period of cost inflation.
Despite the more uncertain outlook, Tesco is pressing ahead with efficiency measures, announcing plans to deliver a further £500m in cost savings in 2026/27 after surpassing its previous £535m target early.
The strategy highlights the balancing act facing major retailers: protecting profitability through cost control while navigating volatile global conditions that risk dampening consumer spending.
Ken Murphy, chief executive of Tesco, said: “We are 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.
“Over the last year, despite cost pressures from new regulation, we have increased our investments in keeping prices low, further improving quality and offering even better service.
“Customers are choosing to shop more with us as a result, leading to our highest market share for over a decade.”
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