Supermarket giant Tesco is set to reveal a rise in profits as sales continue to grow, despite a slowdown in food price inflation.
The company's shares have reached their highest level in almost two years, following an upgrade in profit targets in a post-Christmas trading update. Investors are optimistic about the retail giant's future, with its investment in pricing helping to maintain growth amidst competition from fast-growing discount rivals.
Shareholders will be looking forward to another positive trading outlook when the company updates the market on Wednesday, April 10. Analysts expect Tesco's full-year results to show adjusted operating profits of around £2.9billion for the year to February, up from £2.63billion the previous year.
Group revenues, excluding VAT, are expected to rise to £68.8 billion for the year, up from £65.7billion. Over the past two years, revenue growth has been supported by soaring food and drink price inflation.
However, this has slowed significantly more recently due to reductions in commodity and energy costs feeding through supply chains. The British Retail Consortium revealed last month that grocery price inflation dropped to 1.3%.
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Analysts have hinted that this could present another opportunity for Tesco to expand its volumes and market share in the grocery sector by maintaining its aggressive price-cutting programme. Sophie Lund-Yates, the lead equity analyst at Hargreaves Lansdown, said: "Investors will be looking for further proof of volume uplifts as price cuts continue as inflation tempers."
She added: "With that in mind, it will be the outlook statement that holds the most weight where sentiment is concerned." In their previous update in January, Tesco chiefs reported strong growth over Christmas, with sales increasing by 6.8% during the crucial trading period.
James Grzinic, an analyst at Jefferies, suggested that the supermarket "should confirm another impressive year" after industry data from Kantar indicated that Tesco had continued to enhance its market share over the past year.
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