Tesco bosses see changing shopper behaviour as inflation bites

Tesco reported changing customer behaviour due to the cost of living crisis, while sales continued to grow (PA)

Tesco bosses have warned they are seeing “early indications of changing customer behaviour” due to pressure on households from soaring inflation.

Chief executive Ken Murphy highlighted “unprecedented increases” in the cost of living for customers.

Mr Murphy said Tesco had seen an increase in shoppers turning to own-label products for staples such as bread, pasta and baked beans as they have sought to reduce their weekly shopping bills.

However, he stressed that it is “too early” to predict how food inflation will change over the coming year, despite a report on Thursday by the Institute of Grocery Distribution (IGD) that prices could increase as much as 15 per cent.

Tesco chief executive Ken Murphy (PA)

It came as the UK’s biggest supermarket chain revealed that sales continued to grow over the past quarter, despite pressure on spending and tough comparisons against lockdown-boosted sales over the same period last year.

Tesco said that like-for-like group sales increased by 2 per cent to £13.6bn over the 13 weeks to 28 March, compared with the same period last year.

The retailer said this represented a 9.9 per cent increase against pre-pandemic levels from 2019.

However, the firm’s UK operation said like-for-like sales dropped by 1.5 per cent against the same period a year ago.

Tesco added that its market share has grown against key grocery rivals after driving investment into value-focused promotional campaigns, such as its Aldi Price Match programme.

Mr Murphy said: “Whilst the market environment remains incredibly challenging, our laser focus on value, as well as the daily dedication and hard work of our colleagues, has helped us to outperform the market.

“Although difficult to separate from the significant impact of lapping last year’s lockdowns, we are seeing some early indications of changing customer behaviour as a result of the inflationary environment.

“Customers are facing unprecedented increases in the cost of living and it is therefore even more important that we work with our supplier partners to mitigate as much inflation as possible.

The group’s Booker wholesale arm also witnessed a “strong” jump in trading as it continued its recovery following the impact of pandemic restrictions on the hospitality sector.

Meanwhile, fuel sales soared by 44% to £2 billion as Tesco witnessed a surge in petrol and diesel prices.

Mr Murphy cautioned that he did not expect pressure on fuel prices to ease and stressed that the supermarket should not be seen by customers as a profiteer from recent increases.

“When the Government passed the through the fuel duty changes, we passed that onto customers the same day,” he said.

“There are no signs of relief in prices in the short-term. We lack visibility and so much of the pricing is still linked to the situation in Ukraine.”