Tesco has raised its full-year profit guidance, anticipating resilient consumer spending during the upcoming Christmas period despite a shift in drinking habits. The UK’s largest supermarket chain projected adjusted operating profit between £3.15 billion and £3.3 billion for the year ahead, up from its previous forecast range of £3 billion to £3.3 billion announced in April. Following this update, Tesco’s shares rose by 5.2 percent.
Chief Executive Ken Murphy attributed the optimism to strong consumer resilience amid global uncertainties, noting a desire among shoppers to enjoy the festive season. However, he highlighted a moderation in alcohol consumption influenced by growing health trends and the popularity of weight-loss medications such as GLP-1 drugs. “We expect a more moderate Christmas from an alcohol point of view,” Murphy said, emphasizing the rise in demand for low- and no-alcohol options. Nevertheless, he added that many customers still plan to indulge during the holiday season.
In preparation for increased demand, Tesco said it had increased its stock of key Christmas products and expanded online delivery slots by 10 percent. The retailer’s UK like-for-like sales grew by 1.5 percent in the six months ending August, a slowdown compared with the 4.9 percent growth seen in the same period last year. Overall group like-for-like sales rose 1 percent, with total revenue increasing 3.7 percent to £37.4 billion. Adjusted operating profit for the period rose 6.5 percent to £1.8 billion. Online sales grew 8 percent helped by the rapid expansion of Tesco’s one-hour grocery delivery service, Whoosh, which experienced a 37 percent increase in sales and is on track to exceed £500 million in sales this year.
Tesco has also expanded its product offerings by introducing a UK range of pre-mixed ready-to-drink cocktails, including both alcoholic and non-alcoholic options under its Finest luxury brand line, aiming to cater to evolving consumer preferences during the festive season.
Murphy observed a broader trend towards healthier living, with shoppers increasingly seeking meals higher in protein, more fiber, smaller portions, and healthier dessert options. These shifting habits started among younger consumers and are gradually spreading within the wider customer base.
Market analysts have noted that Tesco faces a competitive festive trading environment amid these changing consumer behaviors. Evidence from industry groups supports the trend toward reduced alcohol consumption: the British Beer & Pub Association reported a rise in non-alcoholic and low-alcohol beer consumption from 170 million pints in 2024 to 200 million pints last year. Research from Lumina Intelligence indicated that beverage categories such as beer and coffee are losing share among users of weight-loss drugs, while no- and low-alcohol drinks, tea, and milk-based beverages are gaining popularity.
Tesco’s interim financial results also demonstrated strength in cash flow and dividends. Pre-tax profit increased 11.5 percent to £1.5 billion, while net debt fell by 1.5 percent to £10 billion. The company’s interim dividend rose 5.2 percent to 5.05 pence per share, and free cash flow grew 21 percent to £1.6 billion.
Despite these positive indicators, some analysts maintain a cautious outlook on Tesco’s near-term performance, anticipating a competitive retail environment as consumer trends continue to evolve.