Key Takeaways
- Tesco shares declined more than 2% following Q1 UK like-for-like sales growth of 1.8%, below market expectations
- Total group like-for-like sales reached £16.83 billion, driven by UK food growth of 2.6% and fresh food expansion of 3.6%
- Booker wholesale division struggled with like-for-like sales down 3.2%, worse than the anticipated 2.4% drop
- Company maintained full-year outlook: adjusted operating profit between £3–£3.3 billion and free cash flow of £1.5–£2 billion
- Chief Executive Ken Murphy attributed the softer performance to difficult weather comparisons versus the prior year
Shares of Tesco tumbled more than 2% on Thursday, hovering near 445p, following the publication of first-quarter results that revealed sales momentum falling short of market projections.
For the 13-week period ending May 30, UK like-for-like sales advanced 1.8%. This figure marked the lower boundary of consensus forecasts and trailed Visible Alpha estimates by approximately 50 basis points. The growth rate represented a notable deceleration from the previous year’s performance.
Chief Executive Ken Murphy moved swiftly to contextualize the numbers. During a media briefing, he emphasized that weather patterns played a significant role, noting that the comparable quarter last year benefited from “outstanding” conditions that artificially elevated performance.
“I wouldn’t be reading too much into it,” Murphy commented.
On a group-wide basis, like-for-like sales also advanced 1.8%, totaling £16.83 billion. Within the UK, food sales registered growth of 2.6%, while the fresh food category demonstrated stronger momentum with a 3.6% increase.
Analysts at Bernstein echoed Murphy’s assessment, characterizing the deceleration as predominantly seasonal and transitory in nature. The brokerage cited moderating food price inflation, more challenging prior-year comparisons, and weakening non-food consumer demand as primary drivers — rather than any fundamental erosion in Tesco’s market standing.
Wholesale Division Underperforms
The Booker wholesale segment emerged as another area of concern. Like-for-like sales contracted 3.2%, exceeding the 2.4% decline that market participants had forecast.
Within Booker, core retail sales decreased 1.5%, partially attributable to the loss of a significant national customer. The catering business experienced a 3.3% decline, which management attributed to unfavorable weather conditions and the timing of the Easter holiday.
Notwithstanding the top-line shortfall, Tesco reaffirmed its full-year financial targets. The retailer continues to project adjusted operating profit in the £3 billion to £3.3 billion range, alongside free cash flow expectations of £1.5 billion to £2 billion for fiscal 2026/27.
Positive Developments Elsewhere
Beyond the UK market, Tesco’s Republic of Ireland operations delivered like-for-like growth of 3.3%, surpassing analyst projections. The Central European segment recorded expansion of 0.8%. Digital sales throughout international markets surged 17.4%.
Customer sentiment metrics also showed improvement. Tesco’s UK net promoter score climbed six points on a year-over-year basis. The retailer expanded its Aldi Price Match program to include its convenience store network as part of ongoing value-focused initiatives.
Tesco noted that geopolitical tensions in the Middle East have not materially impacted trading results to date, though management acknowledged potential inflationary consequences could emerge later in the fiscal year.
Regarding capital allocation, Tesco has executed £341 million in share repurchases since initiating a £750 million buyback program in April.
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