Tesco shares rose on Thursday after the supermarket giant lifted its annual profit outlook after sales jumped in the first half. 

FTSE 100-listed Tesco, which has seen its share price rise 39 per cent in the last 12 months, said group sales rose 4 per cent year-on-year to £3.15billion in the 26 weeks to 23 August.

The supermarket group told shareholders shoppers were increasingly snapping up more fresh food and products from premium lines. 

Tesco saw a near 15 per cent jump in Finest sales volumes during the period, as more than 20million shoppers purchased items from the premium range. 

It also claimed Clubcard loyalty pricing helped save customers 'up to £385 off their annual grocery bill'. 

The group, which is Britain's biggest supermarket, said it was forecasting its full-year profit to be slightly higher than previous guidance thanks to a stronger-than-expected recent first half.

Ken Murphy, the chain's chief executive, said he expected customer sentiment to improve ahead of Christmas, adding that the supermarket was preparing for a 'good' festive period.

Murphy told reporters on Thursday: 'We track customer sentiment every week, and while they're not doing cartwheels down the hallways, they are in reasonably good shape.

'We are preparing for a good Christmas and we're betting on a good Christmas'. 

Murphy said the group, which is locked in a price war with Aldi, had lowered prices on 'thousands of lines' and launched or improved over 860 products in partnership with its suppliers and growers. 

Revenue climbed 2.9 per cent to £34.77billion, slightly above estimates, while adjusted operating profit surged by 15.6 per cent to £1.65billion. 

Its UK like-for-like sales rose 3.5 per cent in its second quarter, after a 4.6 per cent increase in the first. 

But, Booker sales fell 1.9 per cent on a like-for-like basis, 'reflecting a decline in the tobacco market and Best Food Logistics volumes', Tesco said. 

Looking ahead, Tesco now expects to deliver an operating profit of £2.9billion for 2024. It previously said earnings were likely to come in at around £2.8billion.

Tesco shares were up 1.8 per cent or 6.4p to 361.30p on Thursday, having risen over 35 per cent in the last year. 

The chain's market share rose 60 basis points year-on-year to 27.8 per cent in the 12 weeks to 1 September, representing its highest level since January 2022, according to researcher Kantar. 

Richard Hunter, head of markets at Interactive Investor, said: 'While Tesco continues to flex its muscles in a notoriously competitive environment, expectations also progressively increase, lessening the likelihood of positive shocks for investors. 

'Even so, this has done little to constrain a share price which has risen by around 36 per cent over the last year, as compared to a gain of 11 per cent for the wider FTSE 100, and by 72 per cent over the last two years. 

'Despite this rally, the shares remain below the longer-term historic valuation, which suggests room for further appreciation. In the meantime, the longstanding market consensus of the shares as a strong buy and the preferred play in the sector is unlikely to waver.'

Mark Crouch, an analyst at eToro, said: 'Tesco’s excellent 2024 performance is reflected in this morning’s results as the UK's largest supermarket reported a further increase in profits as their shares surged to an eleven-year high.

'Throughout a period in which supermarkets have faced a whole host of headwinds, from a global pandemic to high inflation and a cost-of-living crisis, Tesco has not only maintained their market share but increased it to the highest point in almost three years. 

'And despite the rise of budget supermarket chains, who have managed to wrestle away market share from other big names in the sector, Tesco has not been one of them'.