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Tesco (TSCO.L) raised its outlook for fiscal 2026 as it delivered higher sales during the third quarter and Christmas period, reaching its highest UK market share in more than a decade on the back of strong growth in its fresh food segment.
In a Thursday trading update, the British groceries and retail giant said it now expects to achieve a group adjusted operating profit for full fiscal 2026 at the upper end of its previous guidance range of 2.9 billion pounds sterling to 3.1 billion pounds. The group’s medium-term free cash flow guidance of between 1.4 billion pounds and 1.8 billion pounds, meanwhile, was reaffirmed.
For the 19 weeks ended Jan. 3, Tesco’s like-for-like group sales rose 2.9% year over year, with sales climbing 3.1% in the fiscal third quarter. During the Christmas trading period, the group’s sales were up 2.4%, bolstered by its roll out of 340 new and improved Christmas products under the company’s own brand.
“We also recruited 28,500 additional colleagues for the festive period and offered an extra 100,000 online delivery slots in the week before Christmas, enabled by AI-powered scheduling tools developed by our technology and logistics teams. Online sales grew double-digit and Whoosh also performed strongly, with more than 250,000 new customers over the period,” Chief Executive Ken Murphy said. “We are well positioned for the year ahead and remain committed to ensuring customers get the best possible value by shopping at Tesco.”
Tesco’s 2.9% like-for-like sales growth over the 19-week trading period, however, came in below company-compiled consensus of 3.4% amid an ongoing competitive environment in the UK food retail space, analysts at RBC Capital Markets noted, resulting in its shares trading 6% lower as of Thursday midday.
“This is largely owing to softer performances from Booker, given ongoing tobacco market decline and a retail contract exit, and Central Europe, where Tesco has made targeted price investments to improve competitiveness. UK LFL sales in Q3 were a touch below consensus expectations,” the research firm said in a quick take note.
“We view Tesco as a best-in-class player in the UK Food Retail space, with a strong business model and an experienced management team. The business has executed well, which has led to strong market share gains in recent years,” RBC added. “We are mindful that market share gains, whilst still positive, have moderated in recent months and this trend may continue through 2026.”