- UK like-for-likes up 5.1%
- Full-year guidance unchanged
- Market remains ‘intensely competitive’
Grocery giant Tesco (TSCO) delivered robust first-quarter sales growth as what CEO Ken Murphy dubbed its ‘powerful value proposition’ drove further market share gains across the board for Britain’s biggest retailer.
Tesco’s shares ticked up 2.3% to 394p on the positive news, although the absence of a profit upgrade and Murphy’s admission that the grocery sector remains ‘intensely competitive’ kept a lid on gains.
FINEST START TO YEAR
Group like-for-like sales grew 4.6% in the 13 weeks to 24 May 2025, ahead of the 3.9% consensus estimate, which Murphy attributed to the retail titan’s continued commitment to ‘delivering great value, quality and service for our customers’.
UK like-for-likes rose 5.1%, boosted by food inflation and volume growth, tasty growth in the Finest range and weather-driven growth in home and clothing categories, as Tesco maintained its strong price positioning relative to rivals in the market.
According to Kantar data, Tesco’s UK market share grew 44 basis points year-on-year to 28% over the 12 weeks ended 18 May.
In Central Europe, first-quarter like-for-likes grew by a forecast-beating 4.1%, a performance driven by robust 4.4% growth in food.
The only weak performance came from Booker, which is suffering from a structural decline in tobacco sales and its Best Food Logistics distribution arm not doing as well in supplying products to big-name restaurants and fast-food chains.
SCOPE FOR A BEAT?
As the market largely expected, Tesco left its year-to-February 2026 adjusted operating profit guidance unchanged at between £2.7 billion and £3 billion. However, Shore Capital said ‘strong trading and a competitive but rational market lead us to assert that Tesco is ahead of budget as it enters Q2 and so may be on course to come in at the top end of this range or even beat it’.
Continuing to buy back shares, the FTSE 100 retailer also reiterated its medium-term free cash flow guidance of £1.4 billion to £1.8 billion.
READY FOR THE FIGHT
Murphy commented: ‘In the UK we have continued to see market share gains and increased customer satisfaction across a wide range of measures, a reflection of our powerful value proposition, strong availability and focus on product quality and innovation. We introduced over 350 new own-brand products across the quarter, including the launch of our exciting summer food range, and Finest is going from strength to strength, with sales up 18% year-on-year.’
He added: ‘The market remains intensely competitive, and we are committed to ensuring customers get the best value in the market by shopping at Tesco.’
Shore Capital senses Tesco has been ‘keeping a close eye on Asda, as the latter seeks to stabilise its trading momentum through the Roll Back to Asda Price journey, but as yet this is not a destabilising force for sector gross margins. That said, if the industry wobbles in its discipline, Tesco is ready for the fight.’
AJ Bell investment director Russ Mould explained that Tesco has successfully fought off discount rivals Aldi and Lidl and protected its dominant UK market position, but it cannot afford to take its foot off the pedal.
‘The moment Tesco relaxes is the point at which rival operators pounce on the opportunity to eat some of its lunch,’ said Mould. ‘Its first quarter trading update implies that Tesco is still at the top of its game, achieving moderate but resilient sales growth and continuing to grow its market share.’
He continued: ‘Tesco is offering good quality products at a competitive price and that’s what really matters to shoppers. The Clubcard loyalty scheme provides an important insight into shopping trends so Tesco can make targeted promotions and ensure it stocks the food people want. Clubcard also acts as a mechanism to give shoppers some money off, another tool in its armoury to win the grocery wars.’
DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (James Crux) and the editor (Martin Gamble) own shares in AJ Bell.