Tesco Says Annual Profit Now Seen at Lower End of Guidance Range

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Investing.com — London-listed shares in Tesco PLC (LON:TSCO) fell in mid-morning trading after the U.K. supermarket chain said it expects full-year profits to come in at the lower end of its previous guidance range.

In a trading update on Wednesday, Britain’s largest grocer said it now sees annual adjusted operating income of between £2.4 billion and £2.5 billion, below its prior forecast of £2.4 billion and £2.6 billion.

Chief executive officer Ken Murphy warned that challenges related to soaring inflation, which threatens to weigh on consumer demand, are significant. But he added that it is still too early to predict how customers will change their spending habits due to the cost-of-living crisis in Britain.

“Despite these uncertainties, our priorities are clear. We have the right long-term strategy and we will continue to balance the needs of all of our stakeholders,” Murphy said in a statement.

Tesco was also upbeat about its estimated working capital in 2022 and subsequently upgraded its forecast for annual free cash flow to at least £1.8 billion. It also reiterated its expectation for adjusted operating earnings of around £120 million to £160 million at its banking unit.

However, on a half-year basis, Tesco’s key retail division posted adjusted operating profit of just under £1.25 billion, a 10% decline from about £1.39 billion during the corresponding period last year. The firm cited the impact of inflation, higher investment, and lower volumes due to a “normalization” of trading conditions after a surge in shopping demand during the pandemic.

As of 05:12 ET (09:12 GMT), Tesco had dropped by 2.81% to 204.1 pence. The stock has slumped by 16.55% over the past one-year period.