Tesco (LON: TSCO) reports its Q1 trading update on Friday, which should highlight the effects soaring food inflation has had on the UK’s largest supermarket firm.

Food and non-alcoholic beverage prices continued to remain high in April, at 19.1%, although down from 19.2% in March. However, Tesco’s full-year results saw group sales increase 5.3%, with volumes holding up well despite these pressures weighing on consumer pockets.

Although sales are likely to remain resilient in the face of high inflation, cost inflation and investment in its customer offer caused Tesco’s statutory profit before tax to fall 51% to £1bn in the year to 26 February.

Investors will be keeping a close eye on the group’s profits after Tesco’s previously stated that sales and profits will remain broadly flat.

Tesco shares are currently up 16% in 2023, although Morgan Stanley analyst Izabel Dobreva currently holds an Overweight rating on the firm, with the analyst stating that the stock is not factoring in upside from the company’s margin recovery back in March.

By Jamel Boughedda