Tesco has lifted its annual profit guidance after half-year results in which underlying profit rose 6.5% to £1.8bn, with the supermarket saying shoppers have stayed steady even as geopolitical tensions cloud the outlook.

Upgraded guidance

The group now expects underlying annual profits of between £3.15bn and £3.3bn, up from its previous guidance of at least £3bn. Even at the bottom of the new range, profit would still be lower than a year earlier.

Half-year numbers

In the first six months of its financial year, sales rose 2% to £33.8bn and underlying profit climbed 6.5% to £1.8bn.

• •Sales at established UK Tesco stores rose 1.5%, driven by strong food sales.
• •Sales at the Booker wholesale arm fell 2.6%.

What drove growth

Chief executive Ken Murphy said growth had been helped by strong online sales, which were up 8%, and a 9% jump in revenues from the Finest premium own-label range.

Confidence, AI and uncertainty

Tesco said consumer confidence remained relatively resilient in the first half, though ongoing geopolitical tensions continue to create uncertainty and shoppers' focus stays on value. Earlier in the year the company had warned profits could fall, citing increased uncertainty caused by the conflict in Iran, which began in late February.

The group is also leaning on technology to trim costs. An AI meal planning assistant was tested from April with 280,000 staff before launching for customers in September, and Tesco said AI is making in-store stock replenishment more efficient and improving energy efficiency.

Tesco now expects underlying annual profits of £3.15bn to £3.3bn, up from at least £3bn, though the bottom of the range would still be lower than a year earlier.