Tesco Boosts Earnings Outlook Despite Grocery Sector Competition — Update

By Aimee Look

Tesco raised its full-year profit expectations after reporting a rise in sales for its fiscal first half, as the U.K. grocer seeks to fend off competitors amid a price war in the sector.

The supermarket chain on Thursday increased guidance for adjusted operating profit--its preferred profit metric, which omits exceptional and other one-off items--expecting 2.9 billion to 3.1 billion pounds ($3.91 billion-$4.18 billion) for the year to February 2026. It previously guided for adjusted operating profit of 2.7 billion to 3.0 billion pounds.

For the half year to Aug. 23, the company reported an adjusted operating profit of 1.67 billion pounds compared with 1.65 billion pounds in the year-earlier period.

Tesco posted first-half revenue of 36.04 billion pounds compared with 34.77 billion pounds. Like-for-like sales rose 4.3%, edging up 4.9% in its home market.

Pretax profit fell 6.3% to 1.31 billion pounds, it said. Tesco also raised its dividend to 4.80 pence a share, up 12.9% from the same period the year prior.

"A better-than-expected customer response to our actions and the benefit of an extended period of good weather have helped offset the cost of our investments," the company said.

Analysts had expected adjusted operating profit at 1.57 billion pounds on revenue of 35.76 billion pounds, according to estimates compiled by Visible Alpha.

Competition in the U.K. grocery sector has accelerated after Asda vowed to cut prices earlier this year, but recent industry data showed Tesco managed to defend its No. 1 position by market share. It currently has 27.6% of the market, according to Worldpanel by Numerator data, followed by J Sainsbury with 15%.

Tesco's Chief Financial Officer Imran Nawaz said on a call with investors that the grocer's price position today is stronger than in April, when the company gave its previous profit guidance.

Recently, there has been an uptick in interest around fresh food and increased dining-in habits, Chief Executive Ken Murphy said on the call.

"They're relatively positive trends for us," Murphy said. "It's a source of big investment for us, both in our fresh offering and Tesco Finest."

Like-for-like food sales in the U.K. grew 5.7% in the half year as the company launched 470 new products. It said sales of its Finest range rose 16% on year.

The grocer's revenue growth was bolstered by the market share it snagged from competitors, RBC analysts Manjari Dhar and Richard Chamberlain said in a note to clients. Its market share increased 77 basis points in the first half of fiscal 2026, they said.

Its top-line performance was also given a boost by U.K. food inflation coming in higher than expected, with limited volume impact, according to the analysts.

Shares in Tesco were up 3.5% at 444.60 pence in early afternoon European trading, slightly below an all-time high hit on Tuesday. They are up 21% over the year to date.

Write to Aimee Look at aimee.look@wsj.com

(END) Dow Jones Newswires

October 02, 2025 07:07 ET (11:07 GMT)