Tesco promises 'strong deals' amid 'intensive' price war - as profits set to hit £3bn

The UK's most popular supermarket has said it is to introduce "strong deals" over the next three months as it prepares for Christmas.

It's being done as Tesco chief executive Ken Murphy said he expected people to spread Christmas spending over a wider period to be more manageable and affordable.

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The supermarket price war, spurred by grocers competing to lower costs and win customers, "could be even more intensive" over the next months, Mr Murphy said.

Tesco, which is the UK's number one supermarket by market share, has been successful in this fight, saying it was "continuing to win with customers".

Defending higher profits

As a result, it said on Thursday that it expected annual profit to be higher than first thought, in the region of £2.9bn to £3.1bn.

It's attracted criticism from the union Unite, whose general secretary Sharon Graham said Tesco "has profited from the cost-of-living crisis, making a fortune through unfairly inflating grocery prices".

But Tesco's chief financial officer Imran Nawaz defended the company's profits, saying its investment to bring costs down "worked better than we thought".

"When you sell more, you make more."

This was the biggest contributor to the higher profit outlook, he added.

'Enough is enough'

A lot of the overall price rises in the UK, however, are due to policy measures, Mr Murphy said, referring to a new plastic packaging tax and higher employers' national insurance contributions.

When asked what the chain hoped to see in the upcoming 26 November budget, Mr Murphy said he didn't want it to be "harder for the industry to deliver great value for customers".

After last year's budget delivered "substantial additional operating costs", he said, "enough is enough".

The CEO said he had made "no decision" and "can't speculate" on whether Tesco would close shops if its larger stores are not made exempt from paying business rates.

The company pays more than £700m a year in tax on premises, he added.

Consumer trends

The supermarket chain has also benefited from the trend it observed of people cooking at home and eating in more, it said.

There's been an uptick in sales of fresh food and a "meaningful increase" in cooking from scratch.

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This could be a hangover from the COVID-19 era, maybe due to the growth of streaming services, or potentially a money-saving exercise, Mr Murphy said.

"It's hard to put your finger on the single reason, but it's definitely a trend".

Similarly, Tesco's luxury own-brand line continued to grow in popularity with double-digit sales growth for the third year in a row.

(c) Sky News 2025: Tesco promises 'strong deals' amid 'intensive' price war - as profits set to hit £3bn