Tesco prepares its quarterly results as UK competition regulator circles supermarket
Tesco is set to report its first quarter trading results on Friday as the UK’s competition regulator circles the country’s largest supermarket chain over concerns about its pricing strategies.
Last week, it emerged that consumer goods champion Which? had reported Tesco to the Competition and Markets Authority (CMA) over claims that it does not display its clubcard prices clearly enough.
Which? said the grocer does not highlight the unit price of clubcard deals clearly enough to shoppers, making it hard for them to figure out the cheapest product, the BBC reported.
In response to the claims, a Tesco spokesperson told City A.M.: “We are supportive of calls for greater clarity on the regulations in this area, in the interests of both businesses and consumers, and are actively looking at how we can make the way we display pricing even clearer for our customers. “
“However, given that we are complying with all the current rules, we are disappointed that Which? has chosen to make these ill-founded claims against our Clubcard Prices scheme, which helps millions of households get great value week-in, week-out, and could save shoppers up to £351 per year.”
It comes as the regulator is as Tesco and a number of other supermarkets have been accused of profiteering during a period of high inflation.
The CMA is currently looking at UK supermarkets to examine whether a “failure in competition is contributing to grocery prices being higher than they would be in a well-functioning market.”
Concerns over high food prices also pushed Chancellor Jeremy Hunt to meet with supermarkets last month to discuss how best to reduce the burden of rising prices for households.
However, both Tesco and Sainsbury’s recorded a downturn in their profits for 2022/23.
In its full year results published in April, it reported a seven per cent drop in operating profit for its retail business.
“We expect to be able to deliver a broadly flat level of retail adjusted operating profit in 2023/24 and retail free cash flow within our target range of £1.4bn to £1.8bn,” Tesco said at the time.
“Total revenue saw a modest rise of 7.2 per cent, coming in at £65.76bn as consumers were forced to pay more for everyday products, although it is notable that the rise was much lower than the current rate of inflation at the time which was 10.4 per cent, and the even higher food price inflation levels of 17 per cent,” Michael Hewson, chief market analyst at CMC Markets UK, said.
“This mismatch serves to offer an insight into how much of the rise in food and other related costs are being absorbed by Tesco along with its suppliers and blows a huge hole in those who claim that the supermarkets are gouging prices,” Hewson added.