Tesco announced plans to cut an additional £500 million in costs as it moves to counter rising operating expenses and new tax increases introduced by Chancellor Rachel Reeves.
The move also aims to help the retailer remain competitive during an intensifying price war among UK supermarkets.
The UK’s largest grocery chain said the savings would help offset a £235 million rise in its national insurance contributions following recent government changes. Tesco also cited broader cost pressures affecting its operations.
The retailer reported a drop in annual pre-tax profits of 3.2 percent to £2.2 billion for the year ending in February, despite a 3.5 percent increase in sales to £63.6 billion. Tesco’s market share grew to 28.3 percent, reaching its highest level since 2016.
Retailers across Britain are bracing for higher costs after the government raised employer national insurance contributions from 13.8 percent to 15 percent and lowered the earnings threshold from £9,100 to £5,000.
The British Retail Consortium estimates that the industry will face a combined £2.3 billion in additional costs because of these changes.
Tesco forecast lower profits for the upcoming financial year, with adjusted operating profit expected between £2.7 billion and £3 billion, compared to £3.1 billion last year. This forecast reflects the ongoing price competition between supermarkets, which has significantly impacted their stock market values in recent months.
The supermarket chain said it remains committed to offering customers the best value and is focusing on strengthening its competitive position.
Tesco stated that the cost-cutting measures will provide flexibility and support as it navigates the current market conditions.
