Up to 290,000 Tesco workers are to get a pay bonus after the firm revealed its annual profits more than tripled, but the company warned of much tougher times ahead amid surging inflation.
Britain’s largest private employer will pay out nearly £50m in “thank you” bonuses to employees across its stores, customer fulfilment and customer engagement centres, worth 1.25 per cent of their annual salaries, at the end of May.
The group said the pay out “recognises the way colleagues really stepped up to the industry challenges of the last year” and comes after it increased pay to over £10 an hour.
Britain’s inflation rate hit a 30-year high of 7 per cent in March, even before April’s sharp increase in utility bills. Surging prices are causing the biggest squeeze on household incomes since at least the 1950s.
Tesco warned the cost of living crisis would lead to lower profits in the year ahead.
“Inflation is very real for everyone. It’s household expenses going up and finances stretched. It has been many years since we last saw living costs rise at the rate they are today,” Ken Murphy, the supermarket chain’s chief executive, said.
He also said customer behaviour is returning to more normal patterns as shoppers rely less on supermarket trips post-pandemic.
Mr Murphy said: “Clearly, the external environment has become more challenging in recent months. Against a tough backdrop for our customers and with household budgets under pressure, we are laser-focused on keeping the cost of the weekly shop in check – working in close partnership with our suppliers, as well as doing everything we can to reduce our own costs.”
Tesco saw pre-tax profits jump to £2.03bn in the year to 26 February, up from £636m the previous year, thanks to rising sales and lower costs related to the pandemic. It posted a 58 per cent jump in underlying operating profits to £2.8bn, with retail earnings up 34.9 per cent at £2.6bn.
Profits were helped as it saw Covid-19 costs fall to £220m from £892m the previous year.
Mr Murphy added: “Over the last year, we delivered a strong performance across the group, growing share in every part of our business. “We did this by staying focused on our customers and doing the right thing for our colleagues, our supplier partners and the communities we serve.”
He said Tesco was “laser focused” on keeping the cost of the weekly shop in check and noted cheaper, own-brand products would play an important role. He said Tesco was in “great shape” to deal with the crisis.
Market data suggests shoppers have started to shift their buying habits to save money, opting for more own-label foods.
Analysts said Tesco is benefiting from its strategy of matching prices at discounter Aldi on 650 key lines, the popularity of its “clubcard prices” loyalty scheme and the scale of its store network.
“Tesco has proven its ability to adeptly navigate tricky periods and few would bet against it doing so again,” said Zoe Gillespie, investment manager at Brewin Dolphin.
Reuters and PA contributed to this report
