Supermarket giant Tesco announced Friday a drop in revenue at its UK stores as soaring inflation sees customers spend less on pricier branded food products.
Revenue dropped 1.5 percent to around £9.9 billion ($12.2 billion) in the 13 weeks to the end of May, Britain’s largest retailer said in a statement.
Chief executive Ken Murphy said Tesco was “seeing some early indications of changing customer behaviour as a result of the inflationary environment.
“Customers are facing unprecedented increases in the cost of living and it is therefore even more important that we work with our supplier partners to mitigate as much inflation as possible,” he added.
UK inflation stands at nine percent, the highest level in 40 years, and is set to top 11 percent in the coming months, according to the Bank of England.
Ahead for Tesco, “rising fuel prices are likely to increase the costs of maintaining its delivery and logistics operations”, noted Michael Hewson, chief market analyst at CMC Markets UK.
“Higher staff costs will also act as a brake with the supermarket pledging to increase staff wages in its efforts to retain service levels.”
With inflation soaring, the BoE on Thursday hiked its main interest rate for the fifth straight time.
Policymakers agreed at a regular meeting to increase the cost of borrowing by a quarter-point to 1.25 percent, the highest level since the global financial crisis in 2009.
Prices are soaring worldwide as economies reopen from pandemic lockdowns and amid the Ukraine war that is pushing already high energy costs skyward.
That is causing central banks around the globe to hike interest rates, with analysts however warning that such action could put major economies into recession. (AFP)