Tesco Forecasts Strong Full-Year Profit After Robust Christmas Trading

Tesco (TSCO) anticipates delivering full-year 2025/26 group adjusted operating profit at the upper end of its previously issued £2.9 billion to £3.1 billion guidance range.

This positive revision follows a strong Christmas trading period.

Like-for-like sales, excluding VAT and fuel, for the 19-week period encompassing Q3 and Christmas trading, showed steady growth. The UK saw a 3.7% increase, while the Republic of Ireland (ROI) experienced a 4.6% rise.

However, Booker's performance lagged, with a 1.3% decline. Central Europe recorded a modest 1.0% gain, resulting in an overall group increase of 2.9%.

The retailer's UK performance was particularly noteworthy, achieving its highest market share in over a decade, climbing +23bps to 28.7% for the 12-week period and +31bps to 29.4% for the most recent 4-week period.

This growth was fueled by strategic investments in value, quality, and customer service, especially within its fresh food offerings, which saw a 6.6% increase in like-for-like sales. The company's focus on value was evident in initiatives like offering a Christmas family dinner for six for under £10.

Tesco's online channels also demonstrated impressive growth, with online sales up 11.2% and its rapid delivery service, Whoosh, surging by 47%. This expansion was supported by the recruitment of 28,500 additional colleagues and the addition of 100,000 online delivery slots during the festive period, facilitated by AI-powered scheduling tools.

While the core catering sales for Booker saw a 2.4% increase, core retail sales experienced a slight decline of 0.4%, partially attributed to the ending of a lower-margin national account. Central Europe's growth was underpinned by a strong performance in fresh food and online channels, with online like-for-like sales up 14.3%.

The company's commitment to shareholder value is underscored by its continued expectation of free cash flow within the medium-term guidance range of £1.4 billion to £1.8 billion.

Tesco's ability to maintain a strong price position, as evidenced by its expansion of the Everyday Low Prices commitment and Aldi Price Match initiative, is crucial in a competitive market where value remains a top priority for consumers.

Ken Murphy, Chief Executive, stated, “I am delighted with the strong Christmas we delivered for our customers. Our investments in value, quality and service drove further gains in customer satisfaction and strong growth in fresh food, contributing to our highest UK market share in over a decade,” reinforcing the company’s focus on customer satisfaction and value proposition.