Tesco has warned of lower profits this year as the UK’s leading supermarket looks to keep prices low amid intensifying competition in the grocery sector.
The retailer said on Thursday that “in the last few months, we have seen a further increase in the competitive intensity of the UK market” and in order to have the “flexibility and firepower to respond to current market conditions” profits for the current year would come down.
Tesco is planning for group adjusted operating profit of between £2.7bn and £3bn for this financial year, compared with £3.1bn for the previous year.
“We are committed to ensuring that customers get the best value in the market by shopping at Tesco and we see further opportunities to protect and strengthen our competitiveness,” it said in a statement accompanying its preliminary full-year results.
The retailer’s comments come after smaller rival Asda last month said it had a substantial war chest to invest in lower prices for customers as the value supermarket pressed ahead with a turnaround plan.
Tesco reported a 3.2 per cent dip in pre-tax profit to £2.2bn for the year to February 22, on group sales of £63.6bn, up 3.5 per cent on the previous year.
The company also announced a share buyback totalling £1.45bn to be completed by April next year, £700mn of which will be funded by the sale of its banking operations.
