Tesco is set to reveal higher profits as sales continue to grow

Its shares hit their highest level for almost two years as a result, with the retail giant’s investment in pricing helping to maintain growth despite competition from fast-growing discount rivals.

Shareholders in the business will be hopeful that this can translate to another positive trading outlook when it updates the market on Wednesday April 10.

Tesco’s full-year results are expected to show adjusted operating profits of about £2.9bn for the year to February, according to a consensus of analysts.

That is compared with profits of £2.63bn for the previous year.

Meanwhile, group revenues, excluding VAT, are expected to rise to £68.8bn for the year, from £65.7bn.

Over the past two years, revenue growth has been supported by soaring food and drink price inflation.

However, this has slowed significantly more recently as commodity and energy cost reductions feed through supply chains, with the British Retail Consortium revealing grocery price inflation dropped to 1.3 per cent last month.

But analysts have suggested this could provide a further opportunity for Tesco to grow its volumes and share of the grocery market by continuing its ambitious, price-cutting programme.

Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, said: “Investors will be looking for further proof of volume uplifts as price cuts continue as inflation tempers.

“With that in mind, it will be the outlook statement that holds the most weight where sentiment is concerned.”

In its previous update in January, Tesco bosses said it saw strong growth over the Christmas, with sales up 6.8 per cent over the key trading period.

Jefferies analyst James Grzinic said the supermarket giant “should confirm another impressive year” after industry data from Kantar showed Tesco continued to improve its market share over the past year.

Figures released last month revealed that grocery price inflation has dropped to a new two-year low but almost a quarter of British households are still struggling financially.

Supermarket prices were 4.5 per cent higher than a year ago in March, the lowest inflation rate since February 2022 and a significant drop from last month’s 5.3 per cent, according to analysts at Kantar.

Fraser McKevitt, head of retail and consumer insight at Kantar, said last month: “Grocery inflation has come down significantly since hitting an eye-watering peak of 17 per cent in March 2023.

“However, despite this continued slowdown, many British households are still feeling the squeeze.”

Take-home grocery sales in general overall rose by 4.6 per cent over the four weeks to March 17, according to Kantar’s latest data.