Tesco trims profit guidance

In an environment where consumers are being assailed from all sides by mounting energy bills, rising interest rates and higher costs for all manner of goods and services you are much better off selling essential staples than discretionary items.

However, that doesn’t mean Tesco is immune from the weak consumer backdrop as today’s modestly lowered profit guidance reveals.

Tesco has to try and offer attractive prices to stave off the competitive threat from the German discounters Aldi and Lidl and while it can rely on its purchasing power to some extent, it is still having to sacrifice margins to meet this challenge.

AJ Bell’s Russ Mould said:  “The uncertainty is palpable in the company’s outlook comments and inevitably this will make the market rather nervous.

“On the plus side, Tesco is entering a difficult period with a decent market position and solid balance sheet.

“However, it is hard to see the coming months as anything other than extremely difficult, with cost inflation affected not only by higher energy and labour costs but also the cost of importing goods from overseas thanks to lower sterling.

“The profitability of its online shopping business, which seemed to finally come into its own during the pandemic, will also be affected as smaller basket sizes still cost the same to deliver.”