Tesco has unveiled a robust trading update for the first quarter of the year, as the intense price competition in the UK grocery market continues to rage on. The retailer’s food sales saw a 5.9% year-on-year surge, driven primarily by a stellar performance in its fresh food segment.
Meanwhile, non-food sales witnessed a 6.2% increase, thanks to a significant uptick in home and clothing sales. Tesco’s online market share expanded by 163 basis points, fuelled by an 11.5% spike in sales, which coincided with the launch of its F&F clothing line in May, as reported by City AM.
The company’s share of the broader grocery market grew by 44 basis points year-on-year to 28%, marking 24 consecutive four-week periods of share gains. Booker, Tesco’s food wholesaler and catering distributor, posted core catering growth of 7.3%, attributing this success to the warmer weather and a “strong Easter”.
Core retail growth rose by 5.4%, driven by a “strong symbol brands performance”. The retailer is maintaining its full-year operating profit guidance, targeting a range of £2.7 billion to £3 billion.
Additionally, it expects free cash flow – a measure of the company’s available funds for reinvestment, debt repayment, and shareholder distribution – to fall within the £1.4 billion to £1.8 billion range.
Aarin Chiekrie, equity analyst at Hargreaves Lansdown, remarked: “Tesco continues to flex its muscles as the nation’s favourite grocer, delivering market share gains and increased customer satisfaction in an extremely competitive market.
“Despite the strong start to the year, full-year underlying operating profit guidance has been maintained at a range of £2.7-3.0bn. That points to a slight decline from the £3.1bn seen last year and looks a little conservative in the current environment, potentially leaving room for some positive surprises as the year progresses.”
Starting on April 10, 2025, Tesco initiated a £1.45bn share buyback programme. The retailer announced it had reacquired £448m in ordinary shares by the close of market on 11 June and is planning to finalise the buybacks by April 2026.
The grocery price war has not spared any UK supermarket.
Asda has experienced a shrinkage in its market share over the past twelve months but made headlines when new chairman Allan Leighton spoke about having a “war chest” to revitalise the faltering chain.
Tesco, meanwhile, has projected that its profits might fall by as much as £400m in the upcoming year owing to these difficult market conditions.
In their first-quarter briefing, the retailer reported price matching over 600 items with discount store Aldi and introducing approximately 9,000 Clubcard prices on a weekly basis.
Ken Murphy, chief executive of Tesco, said: “The market remains intensely competitive, and we are committed to ensuring customers get the best value in the market by shopping at Tesco.
“In the UK we have continued to see market share gains and increased customer satisfaction across a wide range of measures, a reflection of our powerful value proposition, strong availability and focus on product quality and innovation.”
Additionally, Tesco experienced a boost in sales across central Europe, with like-for-like growth up 4.4 per cent following a 7.3 per cent surge in fresh food sales.
