Tesco has today upgraded its annual profit guidance as food inflation eased and shoppers snapped up both its low price offers and its premium "Finest" ranges.
Tesco, which has a 27% share of Britain's grocery market, says its overall price rises are lower than headline inflation rates.
That has helped drive market share the group said, and it now expects 2023/24 retail adjusted operating profit, its preferred metric, to be between £2.6 billion and £2.7 billion.
It had previously forecast about £2.5 billion.
"Food inflation fell across the half and while external pressures remain, we expect that it will continue to do so in the second half of the year," said CEO Ken Murphy.
Tesco, like most supermarkets, has reduced the prices of food staples, such as milk, pasta and vegetable oils, in recent months as commodity and other input costs have eased.
It also competes with fast-growing German discounters like Aldi by matching prices on key items.
It has also benefited from consumers entertaining at home rather than dining out, and from shoppers switching to it from more expensive grocers.
In the first half, Tesco made retail adjusted operating profit of £1.42 billion, ahead of analysts' average forecast of £1.35 billion.
Tesco said its Irish sales rose by 6.9% to £1.398 billion (€1.611 billion) in the six month period.
It noted that sales growth was stronger in the first quarter at 8.8%, followed by growth of 8% in the second quarter as the company traded over exceptionally warm weather last year.
Tesco said its new stores saw a sales contribution of 3.1%. These new stores include the nine Joyce's stores it bought in June last year.
The retailer opened one new superstore, in Adamstown in Dublin, and said it continues to look for opportunities to open more Tesco supermarkets in the Irish market.
It noted that food sales growth was particularly strong at 8.9% over the six month period, adding that it lowered the price of over 700 essential products through its "Price Cuts" campaign, leading to a steady decline in inflation across the half.
Non-food sales declined by 4.5%, mainly driven by the cooler, wetter weather over the summer and a slight contraction in discretionary spending.
"We continue to lead the market on "reward" with good engagement on Clubcard Prices, driving a 14.8ppts improvement year-on-year in Clubcard sales penetration to 80%, " it added.
Natasha Adams, Tesco Ireland's chief executive, said the retailer continued to invest in keeping the cost of the weekly shop down for customers through its "Price Cuts" campaign.
"I am pleased with the strong performance in the half year, as we continue to see the strong sales flow-through of the newest stores in our portfolio, including our stores in Galway and at Adamstown, Dublin," Ms Adams said.
"I thank all of our colleagues across the business for their continued contribution in delivering for our customers and communities every day," she added.
Meanwhile, UK like-for-like sales were up 8.7% in the first half, having been up 9% in the first quarter, while group sales, excluding VAT sales tax and fuel, rose 8.9% to £30.7 billion.
