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Tesco: People watching every penny to make ends meet Tesco: People watching every penny to make ends meet
(32 minutes later)
Tesco has said people are "watching every penny" as they try to make ends meet, amid rising costs.Tesco has said people are "watching every penny" as they try to make ends meet, amid rising costs.
The UK's largest supermarket chain said customers are looking for ways to make their money go further, including switching from branded products and cutting back on eating out.The UK's largest supermarket chain said customers are looking for ways to make their money go further, including switching from branded products and cutting back on eating out.
It came as Tesco reported a fall in profits and warned full-year earnings would be at the lower end of guidance.It came as Tesco reported a fall in profits and warned full-year earnings would be at the lower end of guidance.
It also announced a further boost to pay for UK workers.It also announced a further boost to pay for UK workers.
The cost of living is increasing at its fastest rate in nearly 40 years, driven by the rising cost of food and energy.The cost of living is increasing at its fastest rate in nearly 40 years, driven by the rising cost of food and energy.
It is eating into household budgets, with prices rising faster than wages.It is eating into household budgets, with prices rising faster than wages.
What is inflation and why are living costs rising?What is inflation and why are living costs rising?
Milk and cake prices rise, but fruit gets cheaperMilk and cake prices rise, but fruit gets cheaper
Aldi becomes Britain’s fourth-largest supermarketAldi becomes Britain’s fourth-largest supermarket
Tesco said consumers were already spending less as shopping habits normalised after the pandemic, but they are cutting back even more now because of inflation.Tesco said consumers were already spending less as shopping habits normalised after the pandemic, but they are cutting back even more now because of inflation.
The supermarket giant said operating profits in its retail division fell by 10% in the six months to the end of August. However, sales across the whole group excluding its fuel business increased by more than 3% .The supermarket giant said operating profits in its retail division fell by 10% in the six months to the end of August. However, sales across the whole group excluding its fuel business increased by more than 3% .
The retailer now expects annual underlying retail earnings of between £2.4bn and £2.5bn, which is at the lower end of previous guidance.The retailer now expects annual underlying retail earnings of between £2.4bn and £2.5bn, which is at the lower end of previous guidance.
Tesco boss Ken Murphy said customers were trying to "make their money go further, whether they are switching from branded products, between categories or cutting back on eating out".Tesco boss Ken Murphy said customers were trying to "make their money go further, whether they are switching from branded products, between categories or cutting back on eating out".
"As we look to the second half [of the year], cost inflation remains significant, and it is too early to predict how customers will adapt to ongoing changes in the market," he added."As we look to the second half [of the year], cost inflation remains significant, and it is too early to predict how customers will adapt to ongoing changes in the market," he added.
"We know our customers are facing a tough time and watching every penny to make ends meet.""We know our customers are facing a tough time and watching every penny to make ends meet."
'Clearly not immune''Clearly not immune'
As it faces mounting competition from discounters such as Aldi, Tesco said it would lock in the prices of more than 1,000 everyday products until next year to help shoppers cope with rising costs. Tesco faces mounting competition from discounters such as Aldi, which became the fourth-largest UK supermarket for the first time in September as shoppers looked to make savings.
In its update, Tesco said it would lock in the prices of more than 1,000 everyday products until next year to help consumers cope with rising costs.
It also announced that its shop staff in the UK are set to receive another pay rise, their second this year.It also announced that its shop staff in the UK are set to receive another pay rise, their second this year.
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said Tesco's results indicated that cost-of-living pressures were challenging the business. Rival chains Morrisons, Sainsbury's and Asda have also hiked pay for their store workers this year, as UK supermarkets battle for staff amidst increasing competition in the sector.
"Despite the brand's strong value proposition, it's clearly not immune to the new purse tightening habits of its customers." Morrisons raises pay as stores battle for staff
Sainsbury's lifts pay after shareholder pressure
Matt Britzman, equity analyst at Hargreaves Lansdown, said Tesco was under pressure from competitors as shoppers felt the pinch.
"Supermarkets are no strangers to dealing with cost-of-living pressures, there's been an all-out price war in the industry for some years now," he said.
"Amongst the larger players, Tesco's arguably been one of the standout businesses in the battle against low-cost outfits [such as Aldi and Lidl] but pressures on consumer spending can only build for so long before something must give."