Tesco Q1 2025/26 trading statement: what next as UK market share at highest level since 2016
In April the supermarket giant reported strong Q1 performance with 10.6% profit growth and market share gains, driven by its value proposition and customer loyalty programmes. Will the Q1 2025/2026 trading update build on this?
Strong financial performance across key metrics
Tesco delivered impressive preliminary results for 2024/25, with adjusted operating profit increasing by 10.6% and adjusted diluted earnings per share (EPS) rising by 17.0%. The dividend per share was raised by 13.2% to 13.70p, reflecting the company's strong cash generation and confidence in future prospects.
Group like-for-like (LFL) sales grew by 3.1%, with particularly strong performance in the UK (+4.0%) and Republic of Ireland (+4.6%). Central Europe contributed +2.2% growth.
UK & ROI operating profit surged by 10.3% to £3.02 billion, including a £155 million contribution from the Insurance & Money Services (IMS) business. Central Europe delivered an exceptional 28.9% profit increase to £112 million, driven by mix improvement and volume growth.
These results demonstrate Tesco's ability to deliver consistent growth while maintaining its competitive positioning in challenging market conditions, validating the company's strategic focus on value, quality, and customer service.
Investors will scrutinise the UK grocer’s 2025/26 Q1 trading statement on Thursday 12 June, to gauge whether Tesco’s progress remains on track.
Market share gains reflect competitive strength
UK market share increased by 67 basis points year-on-year to 28.3%, representing the highest level since 2016. This significant market share gain demonstrates Tesco's success in attracting customers from competitors through its value proposition and service improvements.
Republic of Ireland share also grew by 29 basis points to 23.9%, showing that Tesco's strategy is working effectively across both its major markets. These market share gains are particularly impressive given the competitive intensity in both markets.
Brand perception in the UK improved by 185 basis points, driven by significant improvements in value (+242 basis points), quality (+153 basis points), and reputation (+282 basis points). The company maintained its position as the cheapest full-line grocer throughout the year.
Tesco Finest sales reached £2.5 billion, representing 15% growth, with 400 new products launched. This premium range performance indicates that Tesco is successfully competing across all market segments, from value to premium offerings.
Digital transformation and customer engagement driving growth
Clubcard usage remains exceptionally high across all markets, with 84% penetration in the UK, 87% in Republic of Ireland, and 88% in Central Europe. This loyalty programme has become central to Tesco's competitive advantage and customer data strategy.
The Tesco app now has 18 million users, representing 12% year-on-year (YoY) growth. This digital engagement provides Tesco with valuable customer insights and creates additional touchpoints for marketing and promotional activities.
Clubcard Challenges were trialled with 10 million customers, demonstrating Tesco's innovation in personalised marketing and customer engagement. These initiatives help drive customer loyalty and increase basket sizes through targeted promotions.
The success of these digital initiatives supports Tesco's strategic pillar of "I Love my Tesco Clubcard," with 23 million-plus households now participating in the programme, providing a substantial competitive moat through customer data and loyalty rewards.
Operational excellence and staff investment
UK staff pay is scheduled to increase by 5.2% to £12.64 per hour by August 2025, demonstrating Tesco's commitment to its workforce during a period of wage inflation across the retail sector. This investment in colleagues supports service quality and staff retention.
Product innovation remained strong with 1,000+ new products and 600+ improved lines launched during the period. This continuous innovation helps maintain customer interest and supports margin development through exclusive and differentiated offerings.
Operational improvements include robotic automation at Peterborough Distribution Centre, with Aylesford DC scheduled to open in 2025. These investments in automation and logistics efficiency support the "Save to Invest" strategic pillar.
The company achieved £510 million in savings during fiscal year (FY) 24/25 and is targeting another £500 million in FY 25/26, demonstrating its commitment to operational efficiency while investing in customer proposition and colleague remuneration.
Capital allocation and shareholder returns
Tesco completed its £1 billion share buyback programme in April 2024 and announced a new £1.45 billion buyback, including £750 million from free cash flow and £700 million from the Banking operations sale.
This substantial capital return programme demonstrates Tesco's strong cash generation capabilities and management's confidence in the business outlook. The banking sale proceeds enable additional returns while focusing the business on core retail operations.
FY 25/26 guidance includes adjusted operating profit of £2.7-3.0 billion (versus £3.13 billion in FY 24/25) and free cash flow of £1.4-1.8 billion. While the profit guidance represents a modest decline, it reflects challenging comparative periods and ongoing investments.
The combination of dividends and share buybacks provides attractive returns to shareholders while maintaining investment in the business for long-term competitiveness and growth.
Tesco share price total return and technical analysis
Over the past ten years the Tesco share price has risen by 83%, much more than its rival Sainsbury's 10% gain but on a total return basis (including reinvested dividends) the difference is even starker: a 215% gain for Tesco versus a 79% gain for Sainsbury.
This equates to an annualised total return for the Tesco share price of 12.16% versus Sainsbury’s 5.99% gain over the past decade.
The current technical picture is interesting as Tesco’s early June high at 398.3 pence was made marginally above its 398.1p February peak before being rejected by it and slipping through its April-to-June uptrend line to its current X level.
Tesco daily candlestick chart
While the 200-day simple moving average (SMA) at 362.8p and the mid-May low at 357.6p underpin, the medium-term uptrend in the Tesco share price is deemed to stay intact.
While the April low at 310.3p holds on a weekly chart closing basis, the long-term uptrend remains technically in place. Currently unexpected failure there would likely push the 200-day SMA at 289.7p to the fore.
Tesco weekly candlestick chart
A rise and daily chart close above the 398.1p-to-398.3p resistance area could lead to the March-to-May 2013 highs at 387.5p-to-388.0p being reached next.
Strategic pillars delivering competitive advantage
Tesco's four strategic pillars continue to drive performance. "Magnetic Value for Customers" includes Clubcard Prices, Aldi Price Match, and Low Everyday Prices, helping maintain the cheapest full-line grocer position.
"Easily the Most Convenient" focuses on online penetration, store refreshes, and rapid delivery services. This pillar addresses changing customer expectations and supports market share gains through improved service levels.
The "Save to Invest" approach enables continued investment in customer proposition and colleague remuneration while maintaining profitability. This disciplined approach to cost management supports long-term competitiveness.
These strategic pillars work together to create a virtuous cycle of customer satisfaction, market share growth, operational efficiency, and financial performance that supports sustainable competitive advantage.
Management outlook and market positioning
CEO Ken Murphy summarised the results by stating: "Our focus on value, quality and availability has earned us record customer satisfaction and the highest market share in a decade. With strong financials and momentum, we're positioned to win in a competitive market. Thanks to our 340,000 colleagues for their dedication."
This commentary reflects management confidence in Tesco's competitive positioning and ability to continue gaining market share through superior customer proposition and operational execution.
The first quarter (Q1) trading statement for 2025/26, published on 12 June, should shed further light on Tesco’s progress.
Tesco analyst rating
Tesco has a TipRanks Smart Score of ‘7 Neutral’ but is rated as a ‘strong buy’ with 9 ’buy’ and 2 ‘hold’ recommendations (as of 10/06/2025).
Tesco TipRanks Smart Score chart
According to LSEG Data & Analytics, 3 analyst have a ‘strong buy’ recommendation for Tesco, 10 a ‘buy’ and 3 a ‘hold’ with a long-term mean price target at 400.08p, 4% above the current share price (as of 10/06/2025).
Tesco LSEG Data and Analytics chart
The combination of financial strength, strategic clarity, and operational momentum positions Tesco well for continued outperformance in the competitive UK grocery market, supported by its scale advantages and customer loyalty.
- Research Tesco's market position, competitive advantages, and strategic initiatives to understand the investment opportunity.
- Consider how consumer spending trends and competitive dynamics might impact the grocery sector.
- Open an account with IG by visiting our website and completing the application process.
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- Consider appropriate position sizing for this defensive consumer staples stock.
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Tesco's April results demonstrated the effectiveness of its strategic transformation, with market share gains, strong financial performance, and substantial capital returns to shareholders creating a compelling investment proposition in the defensive consumer staples sector. This week’s 2025/26 Q1 trading statement should shed further light on the progress the company is making.
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