Tesco profits are soaring while customers are left counting the pennies as inflation bites

Tesco announced ground breaking profit for this year, despite customers struggling to make ends meet amid the cost of living crisis. The grocery giant originally claimed they had to raise prices alongside rising inflation on food items, but the latest food inflation rate is the lowest it’s been since April 2022. This is also significantly lower than peak rates of 19.1% in March 2023.

Despite this, prices have continued to soar, and the company has made more than double the profit it did last year, leading one to question whether part of this profit comes from failing to lower prices to match inflation.

Amid the news of bumper profits, the supermarket has also announced on Wednesday, plans to buy back £1bn of shares over the next 12 months, following the sale of its banking business to Barclays.

The company currently supports 330 thousand workers and recently revealed they would be giving a considerable 9.1% pay rise for staff, bringing their hourly rate to £12.02. CEO Ken Murphy also declared a £70 million award to recognise his workers customer service this year, which will equate to around £300 bonus for full time employees.

A welcome top up for staff in the current climate I’m sure but is dwarfed by Murphy’s personal salary which has grown year on year. In 2022, his base salary was £1.4m and this increased by 3%, giving him an extra £42 thousand a year, simply as part of his basic pay package. This does not include his bonus pay, which brings the overall figure to around £5 million a year.

However, in light of his profit performance, he is likely to take home even more than that this year, through bonuses.

All of this begs the question: if Tesco are only increasing prices out of necessity, why does it seem like the customer is the only one struggling? As the leading grocery retailer in the UK, with a consistent share of over 26 percent of the market, they hold a responsibility to reduce inflation for their customers struggling with the cost of living.

Mr Murphy defends this paycheck, saying Tesco has never been more competitive on price, introducing price match schemes with Aldi, and keeping prices lower than Asda for the last 16 months.

However, he did add that the company was taking a balanced approach which not only reduced the burden on consumers but also rewarded shareholders. It is clear that this ‘balance’ swings heavily in the direction of shareholders amid the soaring prices on Tesco shelves.

There has also been growing controversy online about the use of Clubcards as a way to gain something even more important to business than sales - data. Customer information is a gold mine for businesses who wish to tailor their services for profit. We have seen this online, through cookies, and now Tesco is doing the same.

Even aside from data collection, the very concept of a Clubcard is part of an unfair marketing scheme which tricks customers into believing they are getting a ‘deal’. That emboldened yellow tag, labelled ‘Clubcard price’ seems to scream that you are making a savvy buying decision. But in actuality, it’s all part of a ploy to increase brand loyalty and subsequent profits.

So while the CEO and bosses of Tesco will no doubt be celebrating with expensive wine in a Michelin star restaurant tonight, we are left counting our pennies and scouring stores for Clubcard deals just to make ends meet.