Tesco Commits to Food Price Stability Amid Middle East Conflict
Tesco, the UK's largest supermarket chain, has pledged to do "whatever we can" to keep food prices down for shoppers, even as the ongoing Iran war casts a shadow over its profit outlook. Chief Executive Ken Murphy made the commitment while acknowledging that uncertainty linked to the conflict could impact the retailer's financial performance over the current year.
No Immediate Impact on Product Availability or Prices
Despite the geopolitical tensions, Tesco reported that it has not yet seen any effect on product availability or food prices, excluding fuel, since the conflict began in late February. The company has maintained strong communication with its suppliers, none of whom have raised concerns about disruptions.
Mr Murphy emphasised, "We haven't seen any issues and are in very strong shape. We constantly talk to our suppliers and none of our suppliers have raised any issues." He also dismissed predictions from the Food and Drink Federation that food inflation could surge above 9% this year if the conflict persists, stating that Tesco has observed no such impact on prices thus far.
Fuel Prices Rise and Government Contingency Planning
In contrast to food, fuel prices have already increased in recent months due to the war between US-Israeli and Iranian forces, which has affected energy production facilities and shipments through the Strait of Hormuz. Mr Murphy noted, "We are in good shape in our fuel stocks. We have seen elevated demand recently but we are still very competitively stocked."
Tesco has engaged with the Government to prepare for a worst-case scenario, where the conflict could lead to shortages of carbon dioxide used by the food industry. However, the retailer has not yet detected any impact on customer sentiment in the UK from the conflict.
Financial Performance and Future Guidance
Tesco reported stronger-than-expected adjusted operating profits of £3.15 billion for the year to February 28, a slight increase from £3.13 billion the previous year. Sales, excluding VAT and fuel, grew by 4.6% to £66.6 billion.
Looking ahead, the company expects profits for the current financial year to range between £3 billion and £3.3 billion. It acknowledged providing a wider guidance range than previously planned due to the uncertainty caused by the Iran war. Mr Murphy explained, "We are committed to doing whatever we can to help keep down the cost of the weekly shop, and with the conflict in the Middle East creating further uncertainty for consumers and the economy more broadly, that commitment matters more than ever."
Cost Savings and Market Share Growth
Tesco plans to achieve £500 million in cost savings in 2026/27, following its success in surpassing a £535 million savings target last year. Despite cost pressures from new regulations, the retailer has increased investments in keeping prices low, improving quality, and enhancing service.
Mr Murphy highlighted, "Over the last year, despite cost pressures from new regulation, we have increased our investments in keeping prices low, further improving quality and offering even better service. Customers are choosing to shop more with us as a result, leading to our highest market share for over a decade."
Employee Recognition and Future Outlook
In a move to reward staff, Tesco announced a £65 million award for employees across its stores, warehouses, and customer engagement centres, reflecting the company's strong performance. As the Iran war continues to create economic uncertainty, Tesco remains focused on its dual goals of supporting customers through affordable pricing and navigating the challenging business environment.
