Tesco warns of cost inflation as it raises pay for third time in 13 months
Tesco has warned annual profits will be at the lower end of its hopes as it faces significant cost inflation, revealing it has raised pay for a third time in 13 months.
The UK’s biggest retailer said it was aiming to make £500m of savings this year to offset its higher costs, including more automated tills, but was uncertain how shoppers would behave in the run-up to Christmas.
From 13 November, the basic hourly rate of pay in stores will increase by 20p to £10.30 (or £10.98 in London), making a total 8% increase in pay this year.
The company said it was also freezing prices on more than 1,000 products until next year.
Ken Murphy, the chief executive of Tesco, said: “We know our customers are facing a tough time and watching every penny to make ends meet.
“As we look to the second half, cost inflation remains significant, and it is too early to predict how customers will adapt to ongoing changes in the market. Despite these uncertainties, our priorities are clear. We have the right long-term strategy and we will continue to balance the needs of all of our stakeholders.”
The announcements on pay and price cuts came as Tesco revealed a near-64% fall in pre-tax profits for the six months to 27 August to £413m. Sales rose 6.7% to £32.5bn.
Sales at established supermarkets in the UK increased only 0.7%, suggesting a significant drop in the amount of goods sold as price inflation across the grocery market was more than 5% during the period.
However, Tesco said there had been a 13% increase in sales of its Finest premium own-label range as shoppers switched from eating out to dining at home.
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