Tesco chief executive Ken Murphy has pledged to keep cutting prices to help customers cope with the squeeze on their finances and maintain its sales momentum.
Speaking at its annual results, Murphy added that grocery price inflation at Tesco is starting to stabilise at low single digits. According to data from Kantar, grocery price inflation across the sector is running at 4.5 percent and he said Tesco was “substantially” below that.
Despite this, Murphy said that many households are still struggling to cope with the strain on their budgets. As a result, he said that Tesco will look at making further investments in lower prices and promotional offers. Last year it cut the price of over 4,000 products by an average of 12 percent.
“Although headline inflation has come down, we are well aware of the continued challenges that many customers are facing. We remain committed to investing in value, ensuring that our customers are spending less wherever they can,” he said. “We’ll continue to look at pricing and promotions.”
He added that despite cutthroat competition from its full line rivals and the German discounters Aldi and Lidl, Tesco will do what it takes to maintain its position as the cheapest full line grocer.
Under Murphy, Tesco has grown its profits, sales and market share. For the 52 weeks to February 24, Tesco’s pre-tax profits rocketed from £882million to £2.3billion, its best result in over a decade. Its revenues climbed 4.4 percent to £68.2billion.
Thanks to its strong performance, Tesco hiked its final dividend 17 percent to 8.25p per share, a payout worth £580million to investors. Additionally, it said it will extend its share buyback programme by £1billion over the next 12 months. The period before that saw it spend £750million on share buybacks.
The Unite union attacked Tesco for “raking in mountains of cash while families struggle to put food on the table because of sky high prices”. However, Murphy hit back and pointed out that Tesco’s prices are the most competitive they have ever been.
Tesco is giving its staff a one-off £70million performance bonus, which works out to £300 per full time employee. Murphy said that over the last two years, Tesco has invested over £800million in staff pay rises.
