Tesco to axe further £500m as it braces for tax hikes and deepening price war
Tesco is ramping up its cost-cutting efforts with plans to shave off an additional £500m in spending
According to the Guardian, the grocery giant said today (10 April) that the savings drive will help offset rising operating costs, including a £235m hit from changes to national insurance contributions introduced by Chancellor Rachel Reeves.
The update came as Tesco posted a dop in annual profits and warned that earnings will fall further this year. The retailer now expects adjusted operating profit to come in between £2.7bn and £3bn – down from £3.1bn last year.
Shares fell more than 6% following the announcement.
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Tesco has now delivered more than £1bn in savings over the past two years, having cut £510m in costs in the last financial year alone.
Chief executive Ken Murphy said: “We’ve ended this financial year with more people than we started the year. So I think we’re using those savings to drive growth.
“That growth has come, and that’s allowed us to grow the business and provide more opportunities. We never rule out job cuts. It will be naïve to do that, but at the same time, I think our track record speaks for itself.”
Tesco is among a number of major retailers warning that Reeves’s NICs hike – which took effect this month – could lead to job losses and push up prices.
The supermarket also faces mounting pressure on pricing, with rivals slashing costs to win shoppers. Asda recently promised its biggest price cuts in 25 years, sparking fears of a full-blown price war in the sector.
Tesco’s warning triggered a wider sell-off across listed grocers, with Sainsbury’s and Marks & Spencer also falling 4% and 2% respectively.
Murphy said the retailer is not anticipating a major impact from fresh US tariffs, despite wider concerns about global supply chain disruption.
“We continue to make our own preparations, and we don’t believe that the impacts of the tariffs are significant at this stage for the Tesco business,” he said.
“The majority of our product comes from UK suppliers, and we’re coming into a season where that increases.” He added that only 7% of Tesco’s products are non-food, meaning the retailer is “relatively insulated.”
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