The group, which has a 27% share of Britain’s grocery market, said it now expected a full 2022-23 year retail adjusted operating profit of between £2.4 billion and £2.5 billion (US$2.7-US$2.9 billion). It was previously forecasting £2.4-£2.6 billion, down from the £2.65 billion made in 2021-22.

“Significant uncertainties in the external environment still exist, most notably how consumer behaviour continues to evolve,” it said.

Tesco did, however, upgrade its expectation for full-year retail free cash flow to be at least £1.8 billion. It forecast Tesco Bank adjusted operating profit of £120 million to £160 million.

Confidence levels among Britain’s consumers sank to a record low last month as they struggle with the accelerating cost of living, even before the government’s mini-budget sowed turmoil in the mortgage market, leading to warnings of a sharp drop in house prices.

Wages are failing to keep pace with inflation which was 9.9% in August. Consumers are buying less per shopping trip and trading down to cheaper own-label products.

Tesco reported first-half retail adjusted operating profit of £1.248 billion – down 10% from a pandemic boosted £1.386 billion last year and just below analysts’ average forecast of £1.251 billion.

First-half group sales rose 3.1% to £28.178 billion.

UK like-for-like sales rose 0.7%, having fallen 1.5% in the first quarter.