Due to stronger-than-expected volumes in UK retail in the first half, which the grocer put down to its ongoing investments in "value, quality and service", retail adjusted operating profit for the year ending 28 February is now expected to be £2.9bn, up from earlier guidance of at least £2.8bn and higher than last year's £2.76bn.

Total group sales increased by 2.9% on last year in the first half ended 24 August to £34.7bn, rising 3.5% when excluding fuel to £31.5bn.

Like-for-like sales were up 2.9% over the half, with growth of 3.4% in the first quarter easing to 2.4% in the second, held back by a 2.5% drop in LFL sales at its wholesale arm Booker, which accounts for around 15% of total retail sales. Booker's performance reflected a decline in the tobacco market and Best Food Logistics volumes, Tesco said.

Nevertheless, within its main retail arms, the company saw strong market share gains in UK in the first half of 62 basis points to 27.8%, while its share in the Republic of Ireland gained 88 basis points to 23.5%.

"The combination of price, quality and innovation means we are as competitive as we have ever been, and we have been the cheapest full-line grocer for nearly two years," said chief executive Ken Murphy.

Adjusted operating profits were up 15.6% year-on-year at £1.65bn, while the company boosted its interim dividend by 10.4% to 4.25p per share.

"We are in good shape, with volume growth delivering strong financial performance. This builds on our track record of delivery for all our stakeholders," Murphy said.