Tesco has said people are “watching every penny” as they try to make ends meet, amid rising costs.
The UK’s largest supermarket chain said customers are looking for ways to make their money go further, including switching from branded products and cutting back on eating out.
It came as Tesco reported a fall in profits and warned full-year earnings would be at the lower end of guidance.
It also announced a further boost to pay for UK workers.
The cost of living is increasing at its fastest rate in nearly 40 years, driven by the rising cost of food and energy.
It is eating into household budgets, with prices rising faster than wages.
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Tesco said consumers were already spending less as shopping habits normalised after the pandemic, but they are cutting back even more now because of inflation.
The supermarket giant said operating profits in its retail division fell by 10% in the six months to the end of August. However, sales across the whole group excluding its fuel business increased by more than 3%.