Proactive Investors - Tesco PLC (LON:TSCO) nudged up its full-year profit guidance as it grew its share of the UK grocery market and despite slower sales growth in the second quarter.
Retail like-for-like sales grew 2.9% in the 26 weeks to 24 August, down from the 3.4% rate seen in the first quarter.
LFL sales were up 4.0% in the UK, down from 4.6% in the first quarter, but Tesco's market share expanded by 62 basis points from a year ago to 27.8%, the highest since January 2022.
Sales volumes were boosted by "significant investments ... in value, quality and service", Tesco said, with prices cut on over 2,850 products by an average of around 9% in the UK.
Adjusted operating profit still jumped 15.6% to £1.65 billion, with profits from the retail business up 9.7% if one-offs from Tesco Bank are excluded.
The supermarket chain said sales growth in sales volumes was ahead of its expectations for the first half and so it now expects to deliver around £2.9 billion retail adjusted operating profit for the full year, up from "at least £2.8 billion" previously.
An adjusted operating profit contribution of £120 million is now also expected from what's remaining of the Tesco Bank business after the sale agreed to Barclays (LON:BARC) earlier this year, including a £42 million non-recurring income recognition benefit from a new pet insurance deal.
On an ongoing basis, Tesco expects an adjusted operating contribution of between £80-100 million of profit per year.
Retail cash flow shrank 7.8% to £1.3 billion, while net debt rose 2.1% to £9.7 billion. An interim dividend of 4.25p was declared, set a 35% of the prior full-year payout.
Analysts are forecasting a 3.8% rise in like-for-like sales, representing a steady acceleration from the 3.4% of growth seen in the first half of 2023.