Tesco has raised its full-year profit outlook while forecasting a Christmas season marked by healthier eating habits and reduced alcohol consumption among shoppers. The UK’s largest supermarket chain reported an adjusted operating profit of £1.8 billion for the 26 weeks ending August 29, up 6.5% from the previous year, and now expects annual profits between £3.15 billion and £3.3 billion, slightly higher than earlier projections.

Chief Executive Ken Murphy attributed the anticipated shift toward a “marginally healthier Christmas” to a broader trend of healthier living that gained momentum during the COVID-19 pandemic and continues to influence consumer behavior, particularly among younger customers. He highlighted increased demand for low- and no-alcohol beverages, alongside healthier food options featuring higher protein and fiber content, smaller portion sizes, and more nutritious desserts and ready meals. Despite these trends, Murphy acknowledged that shoppers generally enjoy indulging during the festive season.

Tesco’s sales performance reflected these consumer trends. UK like-for-like sales rose 1.5% in the first half of the year, down from 4.9% growth in the same period last year, while group like-for-like sales increased 1%. Total revenue reached £37.3 billion to £37.4 billion, supported by the introduction of around 800 new or improved products, including expanded healthier ranges. Online sales gained momentum, growing 8%, driven partly by the rapid expansion of Tesco’s one-hour delivery service, Whoosh, which saw a 37% increase in sales and is projected to exceed £500 million in revenue this year.

Murphy also noted that consumers have shown resilience amid ongoing global uncertainties and rising living costs, describing their approach as adapting and continuing with daily life despite external shocks such as geopolitical tensions and inflationary pressures. He pointed out that food inflation remains below wage inflation, supported by intense competition within the grocery sector, which helps keep price rises in check.

Fuel sales rose nearly 20%, influenced by higher oil prices, while Tesco’s “Finest” premium range grew 9% year-on-year. However, the company experienced some tightening of market share over the summer following strong gains the previous year, reflecting heightened competition from discount and rival retailers. Murphy refrained from commenting extensively on potential supermarket consolidation after earlier failed merger talks within the sector.

Tesco has prepared for the festive period by increasing stock of key seasonal items and expanding online delivery capacity by 10%, anticipating that consumers will continue celebrating despite cutting back on alcohol. The company also expressed openness to policy shifts that could improve food accessibility, including the possibility of changes to the UK’s relationship with the European Union.

Overall, Tesco’s outlook combines cautious optimism about consumer spending and health-conscious trends with recognition of the challenges posed by economic pressures and competitive market dynamics.