Will thousands of price cuts be enough to help Tesco win big amid cost of living crisis?
Investors will turn their focus to ‘Big Four’ grocer Tesco’s half year results on Wednesday to see if the company’s consistent slew of price cuts has continued to help it win big with customers amid the cost of living crisis.
The supermarket behemoth has weathered the economic storm well, with its market share ticking up to 27.3 per cent from 26.9 per cent a year ago, continuing to outperform discounters Aldi and Lidl who have rivalled traditional supermarkets in recent years.
In the last year, as food inflation hit shoppers hard, the supermarket has rolled out thousands of price matches on Aldi and ramped up the offers on its loyalty card scheme, in efforts to retain its customers base.
It just recently announced it would price lock over 1,000 everyday products until 2024, to keep in fickle shoppers favour.
Tesco’s revenues leaped eight per cent to £14.8bn at its first quarter results, and shares in the company are up by a fifth in the past year.
Any signs of the company racking in hefty profits may reignite the debate on whether or not supermarkets are profiteering from the squeeze on living – a claim Tesco’s commercial director rejected in Parliament this summer.
Russ Mould, investment director at AJ Bell said: “Shares in Tesco are up by a fifth over the past year. “
“[This] may irk those who think the company is profiteering during a time of inflation and please others who simply view it as a sign of how strong the grocery giant’s competitive position still is, despite the number of rivals who continue to snap at its heel.”
Mould said that Tesco is also facing higher bills of its own, such as utilities and wages, and the firm “may well look to compensate for those costs with higher prices” – while still trying to provide value for customers.
He added: “Analysts and shareholders will therefore study the Tesco statement very carefully for comments on input costs and pricing and margin strategies, as well as looking out for how they may be impacting the reported numbers.”