Tesco expects profit to edge up as cost pressures ease

Tesco said retail profit will likely edge up this year as easing cost pressures allow the supermarket chain to cut prices and attract budget-conscious shoppers.

Tesco also announced plans to buy back £1 billion of shares over the next 12 months. A quarter of that will be funded by a dividend the retailer received from Tesco Bank. Earlier this year Tesco agreed to sell much of its banking business to Barclays in a deal releasing £1 billion of cash for the retailer.

As food price inflation starts to ease, supermarkets are trying to keep prices as low as possible to retain shoppers hunting for cheaper alternatives. Tesco has been competing with German discounter Aldi by price matching on many key products. Britain has such a competitive grocery market that Tesco sees “threats from all sorts of angles,” according to chief executive Ken Murphy.

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