Tesco sales forecasts trimmed but UBS says lack of price war bodes well for profits Proactive uses images sourced from Shutterstock
Tesco PLC (LSE:TSCO) is expected to reassure investors on profit growth when it delivers its first-quarter trading update later this month, despite signs that sales growth has moderated after a strong comparative period, according to UBS.
The Swiss bank said rivals including Asda and Morrisons appear increasingly focused on profitability, reducing the likelihood of a damaging price war in the UK grocery market.
Analysts also pointed to signs of a broader strategic shift, noting Tesco has linked executive incentives to market share for the first time, which UBS sees as evidence of greater long-term ambitions.
UBS reiterated its ‘buy’ recommendation and 545p price target, arguing that Tesco’s longer-term growth prospects and market share gains remain intact.
Analysts nevertheless trimmed their forecasts for UK like-for-like sales growth in the quarter to 2% from 3%, reflecting weaker industry data and less favourable weather than a year earlier, when Tesco delivered 5.1% growth. The revised estimate is in line with other City forecasts.
More positively, improving trading conditions towards the end of May are expected to support quarterly performance.
Analysts said they “fully expect” Tesco to maintain its profit guidance for the 2027 financial year and see the medium-term outlook supported by “continued reliable FCF growth, shareholder-friendly capital allocation and optionality from AI efficiencies, personalised pricing, Retail Media and Marketplace”.
The shares have fallen around 11% since the group’s annual results, a decline UBS believes has created an attractive entry point for investors.