The boss of Tesco said consumers are in a ‘reasonably good shape’ as it raised profit forecasts for the year.

In a bullish update, the country’s biggest supermarket said shoppers are forking out on premium lines while price cuts have also boosted sales.

‘While they are not doing cartwheels down the hallway, customers are in reasonably good shape,’ said Tesco chief executive Ken Murphy. 

‘There’s a real buzz in our stores.’

The comments are in stark contrast to the doom and gloom from Chancellor Rachel Reeves ahead of this month’s Budget.

Sainsbury’s boss Simon Roberts this week warned that concerns about potential tax rises are scaring off shoppers.

Murphy said he expected sentiment to improve. ‘We are preparing for a good Christmas and we’re betting on a good Christmas.’

The comments came as Tesco said half-year sales hit £31.5billion in the 26 weeks to August 24 – up 4 per cent on the same period last year.

Profits rose 16 per cent to £1.6billion with Tesco now targeting £2.9billion for the full-year to the end of February – better than its previous steer of ‘at least’ £2.8billion.

Murphy said the business was ‘as competitive as we have ever been’ as it fights off competition from discounters Aldi and Lidl.

Tesco slashed the price of 2,850 household goods by an average of 9 per cent in the first half of the year, helping it cement its position as Britain’s leading supermarket.

Murphy hailed ‘a willingness’ among customers ‘to spend a little bit more to treat themselves’ as the group sold 15pc more of its Tesco Finest ranges. More than 20million customers have forked out to buy these pricier options.

Tesco also benefited from its strategy of matching the prices

of discounter Aldi on nearly 800 items, and the popularity of its Clubcard loyalty scheme, which provides lower prices for scheme members.

‘Tesco’s putting up a great fight in the battle for consumers’ hard-earned cash,’ said Matt Britzman, senior equity analyst at Hargreaves Lansdown.

‘Its market-leading proposition and income potential shouldn’t be overlooked, and despite the run-up in the share price this year, there’s opportunity for investors,’ he added.

Shares in the FTSE 100 firm rose 2.6 per cent, or 9.1p, to 364p - taking gains for the year to 25 per cen. Mark Nelson, senior equity analyst at Killik & Co, said the shares remain ‘undervalued’ even after this year’s rally.

Russ Mould, investment director at AJ Bell, added: ‘For a company in such a competitive market and with an already dominant market position, to be taking share is quite the feat.

‘The challenge put forward by the German discounters hasn’t gone away.

‘But Tesco has managed to absorb it in a way which other mid-market groceries outfits like Asda and Morrisons have found more difficult.’

The update followed strong industry data from Kantar showing Tesco has a 27.8 per cent share of the grocery market, its highest since January 2022.

But Murphy insisted hot competition ‘keeps us on our toes’.

Murphy, 57, took home a record-breaking £10milion last year – a salary of £1.4million and performance-linked bonuses of £8.6million.