Tesco chief Ken Murphy points to 'encouraging early signs that inflation is starting to ease'

The boss of Tesco has said there are "encouraging early signs that inflation is starting to ease" after shoppers faced soaring food prices – while unveiling sales figures an analyst says show it is “strengthening its grip” as the UK’s top supermarket.

Ken Murphy, chief executive of the UK's largest grocery chain, stressed that customers "continue to face significant cost-of-living pressures" but provided further optimism that rampant food inflation could have passed its peak.

The most recent official data showed food inflation struck 19.3 per cent in April, dipping only slightly from March's eye-watering 19.6 per cent and remaining close to the highest rate for more than 45 years.

It came as the supermarket group in a trading statement reported total retail sales of £14.8 billion for the 13 weeks to May 27, with a like-for-like sales increase of 8.2 per cent against the same period last year. The FTSE 100 group added that its UK division saw a like-for-like sales rise of 9 per cent amid customers switching "from premium retailers". Total sales for the group grew 8.8 per cent at constant rates to £15.2bn.

The group has in a trading statement reported total sales of £15.2 billion for the 13 weeks to May 27. Picture: Daniel Leal/AFP via Getty Images.

Mr Murphy said: "We are pleased with our performance in the first quarter, underpinned by our relentless focus on value. We are very conscious that many of our customers continue to face significant cost-of-living pressures and we have led the way in cutting prices on everyday essential items. There are encouraging early signs that inflation is starting to ease across the market… By focusing on our customers we have delivered a strong start to the year. We are well-positioned for the months ahead and are reiterating our guidance for the full year."

John Choong, an equity analyst at InvestingReviews.co.uk, said: "Tesco's Q1 trading update is an encouraging one. It's worth noting, however, that while the growth rate is impressive by historical standards, this is mainly due to inflation boosting those figures.” Mr Choong added: "Shoppers, investors and even mortgage borrowers may find some joy in CEO Ken Murphy's comments. [He] acknowledged that inflation is starting to ease, which could be an indicator of better things to come. Even so, it could still be another tough year ahead for the company as it left its guidance unchanged."

Banking

Neil Shah, executive director of content and strategy at Edison Group, noted that the retailer’s Edinburgh-based Tesco Bank saw sales rise 13.9 per cent, to £334 million, which he said came on the back of higher credit card spending, and “as the rumoured sale of Tesco’s banking arm remains a possibility”. Tesco expects the lender to achieve adjusted operating profit of £130m to £160m in its 2023/24 financial year.

John Moore, senior investment manager at RBC Brewin Dolphin, said: “Tesco is trading very well in the current environment, as consumers look for value in their shopping baskets. Cashflow remains strong and profits are expected to remain in line with where they were during a bumper 2022, with the bank and its wholesale offering Booker also making meaningful contributions to the group’s overall growth. Tesco is strengthening its grip on its position as the UK’s top supermarket and, with share buybacks continuing and management generally keeping the house tidy, it is in good shape – particularly with life likely getting tougher for its leveraged rivals, like Asda and Morrisons.”