FTSE 100: Tesco benefits from higher prices as quarterly sales near £15bn

Tesco (TSCO.L) has reported "encouraging early signs" that grocery inflation is starting to ease as it reported a jump in sales largely due to higher prices.

UK’s biggest grocer reported sales of £14.8bn for the 13 weeks to May 27, with a like-for-like sales increase of 8.2%.

Large stores sales were particularly strong, up 9.9% while online sales rose 8.2% boosting online market share to 37.5%.

Its UK division saw a like-for-like sales rise of 9% after it said it saw benefits from customers switching “from premium retailers” amid pressure on consumer budgets.

Tesco CEO Ken Murphy hinted that relief could be on the horizon for shoppers as he is seeing early signs of easing inflation.

Read more: Food prices: Pasta bake, fish finger supper and spag bol prices surge by over a quarter

Murphy said: "We are very conscious that many of our customers continue to face significant cost of living pressures and we have led the way in cutting prices on everyday essential items.

"There are encouraging early signs that inflation is starting to ease across the market and we will keep working tirelessly to ensure customers receive the best possible value at Tesco."

Tesco said it has been trying to lower prices for customers, stating that it increased its Aldi Price Match to 700 products, and extended products on its Clubcard range to 8,000 products.

The company said that data showed it had "led the market in cutting prices on essential items to support customers".

Tesco, which have seen shares rise 18% so far in 2023, said it expects prices to rise in 2023 overall but with the rate of inflation declining through the year.

The supermarket said it expects profits of between £1.4bn and £1.8 bn this year.

Read more: UK households paying an extra £833 on groceries as food inflation remains high

The most recent data showed that food inflation struck 19.3% in April, dipping only slightly from March’s 19.6% and remaining close to the highest rate for more than 45 years.

Emma-Lou Montgomery, associate director from Fidelity Personal Investing’s share dealing service, said: “Food inflation is, of course, still a huge issue. And Tesco, like every other retailer, has a battle on its hands to grow profits in the current climate.

"There was nothing on that in this latest update. But the focus will remain on value and the conflicting demands brought about by inflated prices, continuing to make times tough even for this giant in the grocery world.”

Watch: Tesco sees 'encouraging early signs' that grocery inflation is starting to ease

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