By Riad Beladi – International Supermarket News
Tesco, Britain’s largest supermarket chain, has raised its annual profit outlook following a stronger-than-expected first half of the year, buoyed by hot summer weather, resilient consumer demand, and strategic investment in value and service.
The retailer now expects adjusted operating profit for the 2025/26 financial year to come in between £2.9 billion and £3.1 billion, an upgrade from its previous guidance of £2.7–£3.0 billion. The new forecast places Tesco’s earnings firmly on course with last year’s figure of £3.13 billion.
Sales Growth and Market Share Gains
Tesco’s UK like-for-like sales rose 4.9% in the first half, slightly easing from 5.1% growth in the first quarter. According to market research group Worldpanel, Tesco captured more share than any other British grocer, bringing its total to 28.4% of the market – a significant lead over competitors.
Chief Executive Ken Murphy credited this success to “decisive action at the start of the year to further invest in value, quality and service.” Tesco’s focus on matching the prices of discounter Aldi on over 600 products, while heavily promoting its Clubcard loyalty programme, has proved effective in retaining customers amid intense competition.
Competitive Pressures Remain
Despite the upbeat results, Tesco acknowledged that the “competitive intensity remains elevated” across the UK grocery sector. Earlier in the year, the group had cautioned that profits might decline as rivals, particularly Asda, pledged sustained price cuts. However, the anticipated price war failed to materialise, leaving Tesco in a stronger-than-expected position.
The company said an “extended period of good weather” also boosted performance, particularly in fresh produce and seasonal categories, offsetting rising operational costs.
Digital Expansion and Retail Media
Beyond core grocery, Tesco is accelerating its digital transformation. Its growing online Marketplace platform and retail media activities are increasingly central to long-term growth. The company has also stepped up personalised engagement with customers through data-driven offers, strengthening loyalty and encouraging higher spend per visit.
Adjusted operating profit for the first half rose 1.5% to £1.67 billion, underlining the resilience of the business model in a challenging retail climate.
Market Outlook
Tesco shares have risen 17% so far this year, reflecting investor confidence in its strategy. Analysts suggest the combination of competitive pricing, enhanced loyalty rewards, and a growing digital footprint has helped Tesco outperform rivals while maintaining profitability.
The supermarket giant’s ability to adapt swiftly to market pressures – whether from discounters, weather fluctuations, or consumer expectations – has allowed it to remain the undisputed leader in UK grocery.
Analysis: Tesco’s continued success underscores the importance of balancing value with innovation. While price competition remains fierce, loyalty-driven incentives and digital retailing are becoming just as critical to securing market leadership.