Customers shop for food items inside a Tesco supermarket in east London. — AFP
LONDON: Tesco, Britain's biggest retailer, said on Friday there were "encouraging early signs" that inflation was starting to ease across the market as it reported a 9% rise in underlying UK sales in its latest quarter.
"We do believe that we're past the peak inflation," CEO Ken Murphy told reporters.
Stubbornly high inflation has become a major political issue in the country as it outstrips pay growth, while higher taxes and mortgage rates are also squeezing household finances.
Prime Minister Rishi Sunak's key economic pledge to halve inflation in 2023 has been undermined by persistent high food inflation, which was running at over 19% in April, according to the most recent official data.
Grocery inflation eased slightly to 17.2% in May, industry data showed.
Murphy warned though that while some commodity prices were coming down, higher labour costs which are feeding into inflation are likely to stick.
The group, which holds a more than 27% share of Britain's grocery market, reiterated its guidance for broadly flat retail adjusted operating profit, its key profit measure, for the year.
It made 2.49 billion pounds ($3.18 billion) in 2022/23.
Tesco is benefiting from consumers looking to save money by cooking and entertaining at home rather than dining out, and from them prioritising essentials over more discretionary purchases.
It is having to balance the increased cost of products from suppliers with the need to be competitive to prevent shoppers switching to discounters Aldi and Lidl, while it is also facing higher staff wage costs.
Tesco has said it expects prices to rise in 2023 but with the rate of inflation declining through the year.
It has recently reduced prices of some items which have seen the biggest rises, such as milk, butter, bread, pasta and vegetable oil.
Shares in the company, which are up 17% so far in 2023, were down 1% in early trade. - Reuters
