Tesco has reported better-than-expected first-quarter sales growth as improvements in its product range and price competitiveness helped it win market share from rivals. However, the UK’s leading grocer left its annual profit guidance unchanged, with its CEO Ken Murphy noting that the market “remains intensely competitive”.
In the UK, Tesco’s like-for-like sales climbed 5.1% during the 13 weeks to 24th May, an improvement on the 4.3% rise in the previous quarter. The company noted that it had seen 24 consecutive four-week periods of market share gains, with the figure now standing at 28.0% – its highest level since 20216.
Tesco attributed its success to a 65bps YoY uplift in its brand perception, led by improvements in service, quality, and value. The retailer now price matches Aldi on over 600 lines while offering around 9,000 Clubcard Prices deals each week.
During the quarter, Tesco’s food sales rose 5.9%, boosted by fresh categories and the introduction of 350 new products to its Finest range, which saw sales increase 18% as more people dined at home.
Non-food sales (excluding toys) were up 6.2%, driven by strong growth in home and clothing.
The group noted that it saw growth across all channels, led by online, where sales jumped 11.5% and market share rose 163bps after it increased capacity.
Murphy stated that the UK outcome reflected “our powerful value proposition, strong availability and focus on product quality and innovation”.
In the Republic of Ireland, Tesco’s like-for-like sales grew by 5.5% as continued investment in its fresh proposition drove food sales up 5.8%.
At Booker, like-for-like sales rose only 2.0%, held back by the continued decline in tobacco and its Best Food Logistics unit. However, catering sales climbed 7.3%, supported by warmer weather, while its retail business grew 5.4%, boosted by the robust performance of its symbol brands.
Meanwhile, in Central Europe, Tesco’s like-for-like sales were up 4.1% after strong contributions from the produce, dairy and bakery categories drove fresh food sales up 7.3%.
Tesco said it still expects to report adjusted operating profit of between £2.7bn and £3.0bn for the year ending February 2026, down from the £3.13bn achieved in 2024/25.
The group had revealed in April that it expected profit to fall this year as it set aside cash to deal with a step-up in the “competitive intensity” of the British grocery market – a reference to a pledge of sustained price cuts from Asda to win back market share.
“We’re definitely seeing an intensification in competition, I think that broadly, though, it’s been a rational intensification, in the sense that everybody is kind of staying toe-to-toe with each other,” Murphy told reporters today.
“So you’re not necessarily seeing massive movements in relative competitiveness, but everyone has, I think, upped their game a notch.”
He noted that price inflation at Tesco was running below the industry rate, which rose to 4.1% in May (Kantar).
Most analysts think Tesco’s strategy of price matching Aldi on key lines, together with its popular Clubcard Prices promotion, is working well. It is also becoming increasingly digital and developing growth avenues such as its online Marketplace and retail media unit.
“Tesco appears to be in a better position than many of its peers,” said John Moore, wealth manager at RBC Brewin Dolphin.
NAM Implications:
- Tesco is patently firing on all cylinders…
- …and making it work, in unprecedented market conditions…
- …whilst determined to neutralise Aldi’s potential competitive edge.
- (It follows that they will increasingly require similar market fitness from its partner-suppliers)
