People are watching their money as they try to make ends meet.
The UK's largest supermarket chain said customers are looking for ways to make their money go further.
As a result, full-year earnings will be at the lower end of guidance.
There will be a further increase in pay for UK workers.
The cost of living is increasing at a faster rate than it has in the last 40 years.
Prices are rising more quickly than wages.
Consumers are already spending less because of inflation, but they are cutting back more now because of it.
In the first half of the year, the retail division's operating profits fell by 10%. The fuel business' sales decreased by more than 3%.
The lower end of previous guidance is what the retailer now expects.
Ken Murphy said that customers were trying to make their money go further, whether they are switch from branded products to different categories or cut back on eating out.
"As we look to the second half of the year, cost inflation continues to be significant, and it is too early to predict how customers will adapt to ongoing changes in the market," he said.
We know our customers are going through a tough time, and we are doing everything we can to help.
The supermarkets are feeling the pressure as well.
There is more competition in the grocery aisles. There is a huge change in shopping habits.
Customers are changing from branded products to cheaper own label products, and putting less items in their baskets, as well as buying more frozen food.
Tesco is having to absorb some cost price increases to protect customers and stop them from shopping elsewhere. Retail profits are being hit as well as the return to normal shopping habits after the Pandemic.
There are a lot of uncertainties for retailers. Tesco is well placed to navigate the cost of living crisis thanks to its large scale.
The fourth-largest UK supermarket was overtaken by discounters in September as shoppers looked to save money.
The price of more than 1,000 everyday products will be locked in until next year to help consumers deal with rising costs.
The pay rise for its shop staff in the UK is the second this year.
Morrisons, Sainsbury's and Asda have increased their pay for store workers this year, as UK supermarkets battle for staff amidst increasing competition.
Matt Britzman, an analyst at Hargreaves Lansdown, said that shoppers were feeling the pinch.
There has been an all-out price war in the industry for some years now.
Pressures on consumer spending can only build for so long before something must give, which is why Tesco has been one of the leaders in the battle against low cost outfits.
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