LONDON - Tesco raised its annual profit forecast on Thursday as Britain's biggest supermarket group won market share in its first half, giving it momentum ahead of the key festive trading period.

The group, which has a near 28% share of the UK grocery market, said it now expected retail adjusted operating profit, its preferred profit measure, of "around" 2.9 billion pounds ($3.8 billion) for its 2024/25 year, up from a previous forecast of "at least" 2.8 billion pounds. It made 2.76 billion pounds in 2023/24.

Tesco, whose shares have risen 22% so far this year, is continuing to benefit from its strategy of matching the prices of discounter Aldi on hundreds of key items, and the popularity of its Clubcard loyalty scheme, which provides lower prices for members. These programmes are being financed by taking costs out of the business.

For the first half, Tesco's retail adjusted operating profit was 1.56 billion pounds, up 10% on a constant currency basis.

Its UK like-for-like sales rose 3.5% in its second quarter, having been up 4.6% in the first quarter.

Tesco's market share rose 60 basis points to 27.8% in the 12 weeks to Sept. 1 year-on-year, its highest level since January 2022, according to researcher Kantar.

"Our strong UK and ROI (Ireland) market share gains across the last year demonstrate our continued momentum," CEO Ken Murphy said.

"We are in good shape, with volume growth delivering strong financial performance."

(Reporting by James Davey; Editing by Kate Holton and Sarah Young)