Tesco Shares: Citi Remain Buyers

Following Tesco's (LON: TSCO) first-quarter trading statement last week, analysts at Citi said they remain buyers of the supermarket giant's shares, stating the quarter was encouraging.

Tesco reported continued momentum in its business for the first quarter of the 2024/25 financial year, with strong sales growth and increasing market share.

Sales across the UK and Republic of Ireland (ROI) rose +3.6%, driven by volume growth across all categories, particularly fresh food. Meanwhile, its market share grew to 27.6%, its highest level in two years.

Citi said Tesco's UK like-for-like sales of +4.6% were better than expected, with Ireland also strong and Booker slightly weaker, given
tobacco and Best Food Logistics.

“Guidance remains unchanged as expected this early in FYFeb25, although, with continued positive volumes and price discipline, Tesco reassuringly enters FYFeb25 with the momentum to deliver YoY Retail
UEBIT growth,” said Citi.

While the bank would expect consensus to hold at this early juncture, they view the release positively, with UK core like-for-like sales ahead of expectations “as we enter into a normalised environment with the grocer continuing to take market share.”

“We remain buyers of the shares,” declared Citi, noting that the company's stock is trading on 11 times its FY26e P/E supported by a 5% dividend yield and a 6% buyback.

Following the trading statement, Morgan Stanley, UBS, and Barclays reiterated their Buy/Overweight ratings on Tesco. Based on 14 analysts covering the stock, 11 have a Buy rating on Tesco, with two assigning it a Hold rating and one a Sell. The average price target is 337.3p, representing a potential 9% upside from current levels.