Tesco to reveal sales performance as cost of living crisis continues

However, intense competition in the industry means the group is coming under continued pressure to preserve profitability as some higher costs persist.

The firm will shed light on its financial performance over the six months to August in an update on Wednesday.

Shares in Tesco are up by a fifth so far this year despite the difficult backdrop for the grocery industry.

The positive trajectory has come despite German discount rivals Aldi and Lidl snapping up new customers, with figures from Kantar showing that Tesco had grown its market share to 27.3 per cent in September from 26.9 per cent, despite challenging conditions.

Tesco has invested heavily in its pricing to retain and grow its customer base, as well as continued commitment to its Aldi Price Match campaign.

Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: “Tesco’s razor-sharp focus on keeping prices down is helping it fend off rival discounters, which should bode well for its half-year numbers.

“The retailer’s huge scale is helping to power its value offering and the deep-rooted nature of its supplier relationships is ensuring it can stay super-competitive.

“Expanding the Aldi price match promotion has also been paying off, enabling Tesco to retain shoppers’ loyalty and discourage them from going elsewhere and investors will want to see this trend continuing.”

Over the first quarter of its financial year, Tesco reported like-for-like sales growth of 8.2 per cent against a year earlier, with a 9 per cent increase in the UK.

Investors will be keen to see that this growth has continued despite a slowdown in inflation across the sector.

They will also have an eye on profitability. In April, chief executive Ken Murphy offered a forecast of broadly flat adjusted operating profit from its retail business of £2.5bn for the current full year.

Some analysts have suggested it could be marginally higher and shareholders will be keen for more guidance about the profit outlook as a result.

Analysts from AJ Bell said: “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 providing value for its customers, and the firm does constantly stress its Price Match and Clubcard offers.

"This is a difficult balancing act. We all have to eat, drink and keep our houses clean but at the same time we may buy less, or at least trade down through brands, when times get tough. 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.”