Tesco Earnings: Shares Fall on Conservative Outlook Despite Market Share Gains and Solid Results

No-moat Tesco finished its fiscal year in February 2025 with sales growth of 3.5% and total revenue of GBP 69.9 billion, in line with company-compiled consensus. Tesco increased market share by 60 basis points, leading the UK grocery market with a 28% share according to Kantar, while the Irish market share gained around 30 basis points to 24%. Despite market share gains, Tesco released the next fiscal year's operating profit guidance as lower than the year just ended amid a rising pricing war across local grocers. This sent the share price down nearly 7% at the market opening on April 10. We see this market reaction as overly pessimistic given Tesco’s solid performance and recent market share gains. We maintain our GBX 316 fair value estimate and view shares as fairly valued.