Tesco's boss has promised to "keep the cost of the weekly shop as affordable as possible" amid the cost of living crisis.
The big four supermarkets have come under increasing pressure from the German discounters as shoppers seek better value, with Aldi recently leapfrogging Morrisons to become the UK's fourth largest supermarket for the first time.
Chief executive Ken Murphy said customers were buying less on each shopping trip, switching to cheaper own-brand products and from fresh to frozen food as part of efforts to cut costs in the face of soaring inflation, which hit 9.9% in August.
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In response, Tesco said it is freezing the prices of more than 1,000 everyday products until 2023 to help cash-strapped customers despite falling half-year profits. Tesco also unveiled its second staff pay rise this year to help support workers.
It said the basic hourly rate of pay for store staff will increase by a further 20p to £10.30 - or £10.98 in London - from November 13, meaning hourly rates have increased by nearly 8% this year.
Mr Murphy said: "We know our customers are facing a tough time and watching every penny to make ends meet. That's why we're working relentlessly to keep the cost of the weekly shop as affordable as possible.
"As we look to the second half, cost inflation remains significant, and it is too early to predict how customers will adapt to ongoing changes in the market."
Mr Murphy added there were "significant uncertainties" in the wider economy and the consumer outlook, but added that "customers are determined to enjoy Christmas".
He said: "We think it's going to be a Christmas that people are going to want to celebrate but will want to celebrate in a more affordable way."
Tesco now expects annual underlying retail earnings of between £2.4 billion and £2.5 billion - the lower end of previous guidance for between £2.4 billion and £2.6 billion and a fall from the £2.7 billion notched up in the previous year.
The more cautious outlook came as it posted a 10% fall in underlying retail operating profits to £1.25 billion for the six months to August 27, despite group sales excluding fuel rising 3.1% to £28.2 billion.
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