Britain’s biggest supermarket chain Tesco warned Thursday that its profits could be impacted by the Mideast war lifting food costs, as it posted higher earnings for its last financial year.
Tesco said adjusted operating profit for 2026/27 could come in lower compared with the 12 months to the end of February.
The figure is forecast to reach between £3 billion and £3.3 billion, having risen slightly to £3.15 billion in the 12 months to the end of February.
"Reflecting the increased uncertainty caused by the conflict in the Middle East, we are providing a wider range of guidance than we were previously planning," the company said in its earnings statement.
"Much will depend upon the duration of the conflict and in particular, the potential implications for UK households and the economy more broadly."
Prior to Thursday's update, analysts were on average forecasting operating profit of £3.23 billion for 2026/27.
Tesco chief executive Ken Murphy said the company is "committed to doing whatever we can to help keep down the cost of the weekly shop".
Surging fuel prices caused by the Iran war weighed on British consumers last month, dampening household spending as travel plans were shelved, surveys showed on Tuesday.
UK grocery inflation held at 4.3 per cent in the four weeks to March 22, according to data from researcher Worldpanel. However, trade body the Food and Drink Federation has warned food prices will be rising by almost 10 per cent by December.
Reports have also suggested food availability could be hit by a possible shortage of CO2 gas which is a key input in the food industry.
Tesco said it is targeting a further £500 million of costs savings this year to help fund investments in its customer offer.
The group added that its profit after tax jumped nearly 10 per cent to £1.79 billion in its 2025/26 financial year.
Revenue grew 5.4 per cent to £73.7 billion.
Aarin Chiekrie, equity analyst at Hargreaves Lansdown, said Tesco is "in a better position than most of the competition when it comes to weathering these headwinds.
"Its enormous scale and strong relationships with suppliers are its key tools in keeping prices down for customers, giving them little reason to look elsewhere," he noted following the earnings update.