Tesco predicts flat profits when inflation hits the supply chain

Tesco, Britain’s largest supermarket chain said it would have difficulty increasing profits due to “unprecedented levels” of inflation in its supply chain.

Ken Murphy, chief executive of the company, stated that the company has struggled with “unprecedented amounts of inflation in prices we have paid suppliers for their goods” as it tries to remain competitive on price.

Tesco announced on Thursday that retail adjusted operating profit would be “broadly unchanged” in this financial year. It said this after it revealed that profits for the year ended February fell by 6.3% to £2.4bn.

It has invested in many initiatives, such as Aldi matching discount chain Aldi on pricing to stop shoppers defecting to competitors.

Sales for the full year rose by 5.3% to £57bn. Fuel included, revenue rose 7.2% to £65.7bn last year.

Zoe Gillespie is RBC Brewin Dolphin’s investment manager. She stated that while profits will be flat in the next year, Tesco’s share buyback program and solid execution of its strategy means it remains in great shape.