Tesco has increased its full-year profit guidance to between £2.9bn and £3.1bn, following an increase in its sales.

The supermarket’s sales rose by 5.1% year-on-year in the six months to 23 August to £33.1bn, while its operating profit jumped by 1.6% to £1.7bn.

Tesco’s UK and Ireland division recorded an operating profit increase of 2.1% to £1.46bn in this period, following volume-driven market share gains and good weather, helping to offset investment in its customer offer and operating cost inflation.

Furthermore, its earnings per share increased by 6.8% year-on-year to 15.4 pence.

Chief executive at Tesco, Ken Murphy, said he was pleased with the firm’s first half performance.

He added: "Our market share gains in the UK are a particular highlight and reflect the decisive action we took at the start of the year to further invest in value, quality and service. The extension of our savings programme is helping offset new operating cost inflation, including increased national insurance and other regulatory costs. Sales have grown across all our businesses, with customer satisfaction scores improving once again.

“The steps we have taken to keep prices down for customers have improved our price position relative to the market."

Tesco has increased its profit guidance for the current financial year, and is expecting a free cash flow range of between £1.4bn and £1.8bn.

In addition, Tesco has bought back £891m in ordinary shares, since the launch of its £1.45bn share buyback scheme that launched on 10 April.

Following this, shares in the supermarket increased by over 4%.

Head of equity research at Hargreaves Lansdown, Derren Nathan, concluded: "Tesco’s stores and vans have delivered a little extra in the first half. Underlying operating profit of £1.7bn came in a shade ahead of market forecasts, but intensified competition and cost pressures meant that growth in profits lagged sales by some margin.

"Still, management were confident enough to raise the mid-point of full-year profit guidance by 5% to £3bn. It’s not a spectacular change, but every little helps."

---