Tesco shareholders eye returns as ‘awful April’ bill hikes set to hit profit
Tesco shareholders will be watching closely for signs that it is managing to fend off competition as the supermarket price war heats up and “awful April” bill hikes eat into household income.
The UK’s biggest supermarket chain will unveil its financial results for the first three months of its financial year on Thursday.
Tesco recently signalled that a price war was mounting within the sector, saying that it expects to make as much as £400m less in profit in the year ahead as a result of what it called “a very competitive market”.
Asda has promised its biggest price cuts in 25 years under returning boss Allan Leighton, in a bid to revive the languishing chain.
The rapid growth of discounters Aldi and Lidl in the UK has also driven more competition as supermarkets move to match some of their prices to low-cost alternatives.
Tesco is expecting to generate a group adjusted operating profit of between £2.7bn and £3bn for the year to February 2026, down from the £3.1bn made over the latest year.
A group of analysts for AJ Bell said that, despite fears of a supermarket price war, Tesco’s share price was close to a 12-year high.
“Asda’s reboot under new chair Allan Leighton prompted such concerns but, for now, the competition seems relatively limited in scope, with a focus on Clubcard and loyalty scheme customers and loss-leaders that drive footfall,” they said.
“Mr Leighton claims he can see the green shoots of recovery at Asda, but the latest Kantar survey of market share in the UK grocery market suggests that Tesco, Aldi and Lidl continue to have both Asda and Morrisons for breakfast.”
Asda is the UK’s third-largest UK supermarket, behind Sainsbury’s, but remains close to being overtaken by Aldi which has seen its share of the market grow steadily.
Eyes on consumer spending after ‘awful April’
Meanwhile, investors will be looking for an update from Tesco on how consumers are faring following the onset of higher bills during what has been dubbed as “awful April”.
Household bills including for electricity, water, phone deals, and council tax rose for many from the beginning of the month.
Financial markets analyst Michael Hewson said trading updates from the UK’s biggest retailers can give a strong indication of consumer trends and any signs of weakness in the UK economy.
He said Tesco’s Booker division – the food wholesaler – was the “main drag” on its latest annual sales figures, “largely due to weakness in its tobacco business, as well as the fast-food market serviced by its Best Food logistics brand”.
“This business supplies the likes of Burger King, Pret a Manger, Pizza Express, Zizzi, Nando’s and Pizza Hut, and saw a like-for-like sales decline of 5.1 per cent to £1.44bn,” he said.
By Anna Wise, PA Business Reporter