Tesco beats profit target but warns of Middle East impact
Tesco has delivered better-than-expected annual profit but warned that conflict in the Middle East has created “further uncertainty”.
In the year to 28 February, adjusted operating profit rose to £3.15 billion, beating a forecast of between £2.9 billion and £3.1 billion. Revenue increased by 5.4% to £73.7 billion.
Subscribe to TRBLike-for-like sales for the UK and Ireland climbed by 4.2%, as Tesco benefited from market share gains and volume growth in both markets. UK like-for-like sales also rose by 4.2%, with growth across all channels. Food like-for-like sales climbed by 5.2%, with a strong contribution from fresh food.
Tesco said UK customers responded well to targeted investments in price and the shopping experience following an increase in competitive intensity in the UK.
During the year, Tesco launched over 2,000 new and improved products in the UK, including a large-scale refresh of its frozen food range. Particularly strong performers included dine-in ranges such as Finest Valentine’s and Finest Steakhouse, as customers opted for restaurant-inspired meals at home.
Clothing like-for-like sales grew 5.1%, driven by a continued strong performance in womenswear. Home like-for-likes declined 0.7%, but grew by 1.8% on an underlying basis when excluding the impact of the transition to a commission model with the Entertainer for toys.
Ken Murphy, Tesco chief executive, 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.
“Over the last year, despite cost pressures from new regulation, we have increased our investments in keeping prices low, further improving quality and offering even better service.
“Customers are choosing to shop more with us as a result, leading to our highest market share for over a decade.”
Looking ahead to the outcome of the current year, Tesco said increased uncertainty caused by conflict in the Middle East means it is providing a wider range of guidance than previously planned.
It is currently expecting to deliver adjusted operating profit of between £3 billion and £3.3 billion for the 2026/27 financial year.
Tesco has also announced that it is handing colleagues in its stores, distribution centres and customer engagement centres a £65 million special performance bonus in recognition of “exceptional service” over the last year.
Murphy said: “Since setting out our multi-year performance framework in 2021, we have delivered meaningful progress for all our stakeholders.
“As new opportunities and challenges have emerged, we have evolved our strategic ambitions, positioning us well to deliver sustained long-term growth by providing even better value for customers.”
