What’s going on here? Tesco, the UK's biggest grocery chain, recorded a 10% increase in its first-half profit and raised its full-year profit forecast on Thursday. What does this mean? Tesco’s been laser-focused on selling high-quality products for low prices, going toe to toe with rival budget-friendly retailer Aldi and enticing customers with its loyalty program as a bonus. That’s paid off better than even the firm had hoped for, with more products flying off the shelves than expected over the last six months. And sure, the UK’s retail landscape has been tougher on some, especially those selling less essential, high-ticket items like furniture. But non-food items only make up 7% of Tesco’s sales, and that focus helped it increase its market share to 28%. Why should I care? For markets: Every little helps. Tesco is one of the UK’s biggest public companies, making up over 1% of the country’s FTSE 100 index – which tracks its biggest companies. So when the grocery chain’s stock initially picked up 2% after the news, the index got a tidy push along too. More of that, and investors might come flooding back to Blighty. They’ve been put off by the country’s so-so economy lately, see. Case in point: pension funds in Britain only own about 2% of UK stocks – a record low. For you personally: Hopefully happier holidays. Tesco’s upbeat forecast suggests it’s feeling chipper heading into the holiday season. Rival Sainsbury’s, on the other hand, is more concerned about Brits’ shopping habits in the months ahead. That’s because while lower inflation means the prices of groceries won’t rise by quite as much, quite as quickly, they’re probably not going to come down all that much, either. And with UK consumer confidence plumbing new lows last month and mooted tax hikes this month, Brits would be forgiven for penny-pinching for the rest of the year. |