Tesco has reported higher full-year sales and cashflow after stepping up investment in ‘lower prices and improved quality’.
On a 52-week comparable basis, sales excluding VAT and fuel rose 4.6 per cent to £66.6bn, while adjusted operating profit edged up 0.8 per cent to £3.15bn.
Free cashflow increased 11.8 per cent to £1.96bn, and adjusted diluted earnings per share climbed six per cent to 29.0p.
The UK’s biggest grocer said its focus on ‘low prices, improved quality and better service’ had helped it reach its highest market share in more than a decade.
Chief executive Ken Murphy said: “We are committed to doing whatever we can to help keep down the cost of the weekly shop, and with the conflict in the Middle East creating further uncertainty for consumers and the economy more broadly, that commitment matters more than ever.”
Tesco has ramped up its value proposition over the last year, tripling the number of products in its Everyday Low Prices scheme to 3,000, alongside more than 10,000 Clubcard Prices and over 600 Aldi Price Match lines.
At the same time, shoppers are still spending selectively on premium products, with Finest sales rising 15 per cent to £3bn.
Alex Pugh, investment writer at Freetrade, said Tesco’s results showed it was serving “a savvy consumer who wants to spend, but on their terms”.
He added: “The fact Tesco is expanding Everyday Low Prices, Clubcard Prices and Aldi Price Match while also growing Finest sales 15 per cent to £3bn sums up contemporary British spending: thrift on the staples, selective on the extras.”
Tesco’s UK market share rose to 28.5 per cent, up 24 basis points year on year, while group like-for-like sales increased 3.5 per cent.
Online remained a bright spot, with UK sales up 11 per cent to more than £7bn, while rapid delivery service Whoosh grew 51 per cent to more than £400m in sales.
However, Tesco’s outlook struck a more cautious note.
It said it expects adjusted operating profit of between £3.0bn and £3.3bn in 2026/27, reflecting heightened uncertainty around the consumer backdrop and wider economic conditions as a result of conflicts in the Middle East.
Charles Allen, senior industry analyst at Bloomberg Intelligence, said the guidance range came in below market expectations at the midpoint and pointed to a more defensive stance from the retailer.
He said: “Tesco is making clear it will defend its hard-won low-price position rather than push to widen margins.”
Allen added that a six per cent dividend increase and a new £750m share buyback helped offset some of that caution for investors.
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