Sales Growth Accelerates At Tesco Despite ‘Intensely Competitive’ Market

 Sales Growth Accelerates At Tesco Despite ‘Intensely Competitive’ Market

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, it left its annual profit guidance unchanged, CEO Ken Murphy: market “remains intensely competitive”.

UK like-for-like sales up 5.1%, 13 weeks to 24th May vs 4.3% rise in previous quarter, 24 consecutive four-week periods of market share gains, now 28.0%, highest since 2021.

Tesco said its success due to a 65bps YoY uplift in its brand perception (improvements in service, quality, and value). It price matches Aldi on 600 lines, 9,000 Clubcard Prices/week.

During the quarter, Tesco’s food sales up 5.9% via fresh categories and 350 new Finest products, sales up18% (home dining)

Non-food sales (excluding toys) up 6.2% via home and clothing.

Growth in all channels, (online sales up 11.5%, market share up163bps).
Murphy: UK outcome reflected “our powerful value proposition, strong availability and focus on product quality and innovation”.

Republic of Ireland L-for-L sales up 5.5% (continued investment in fresh drove food sales up 5.8%).

Booker L-for-L sales up 2.0% (continued decline in tobacco and its Best Food Logistics unit), catering sales up 7.3%, retail business up 5.4% (symbol brands).

Central Europe like-for-like sales up 4.1% ( produce, dairy and bakery categories drove fresh food sales up 7.3%).

It still expects to report adjusted operating profit of £2.7bn to £3.0bn for year ending Feb 2026, vs £3.13bn 2024/25.

It 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 – ( Asda pledge of sustained Asda price cuts 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.

“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 key line Aldi price matching, and Clubcard Prices promotion, are 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.

NamNews 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)
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