Tesco will shed more light on how the conflict in the Middle East is affecting inflation and consumer confidence when it updates shareholders next week.
The UK’s largest supermarket group has grown its share of the UK grocery market in recent years, on the back of a strong focus on pricing, helping support customer demand despite pressure from industry rivals.
Investors will be keen for the retail giant to report on its outlook for costs and pricing in its full-year results update on Thursday April 16, amid uncertainty driven by the Iran war.
Grocery price inflation held at 4.3% in March, according to data from Worldpanel by Numerator, but is expected to increase.
Industry group the Food and Drink Federation predicted food inflation could soar higher than 9% by the end of 2026 because of surging energy costs, which are a significant component in the cost of food production.
It was also among retailers brought before the Chancellor earlier this month to discuss the impact of the conflict, as bosses and the Government agreed to explore together how to ease the cost of living for consumers.
Tesco is also the UK’s largest petrol retailer, with more than 500 forecourts across the country.
The price of petrol has risen by about 19% to an average of 158.03p per litre since the crisis began at the end of February, and diesel prices have shot up by about 34%.
Shareholders and analysts will be interested to hear if consumer sentiment has been affected by news of the conflict and rising fuel costs.
Dan Coatsworth, AJ Bell head of markets, said: “Inflation should nominally boost sales figures and translate into increased revenue, but volumes may be affected as consumers cut back, and margins, which are always thin in the supermarket game, will come under pressure.
“A key question will be the extent to which Tesco seeks to take on some pain in order to protect its competitive position.”
Next Thursday, Tesco is expected to reveal adjusted operating profits of about £3.1 billion for the year to February, close to the £3.13 billion profit reported a year earlier.
It is also predicted to deliver revenues of £72.5 billion for the year, according to a consensus of analysts.
In its previous update in January, Tesco cheered its highest market share for more than a decade after reporting stronger festive sales despite “intense” competition.
It had reported a 3.3% rise in UK and Ireland like-for-like sales over the six weeks to January 3.