Tesco confirms full-year guidance as it reaps further market share gains / Image source: Tesco
  • First-quarter sales please
  • Profit outlook confirmed
  • Gaining share with Finest

The UK’s largest grocery chain by both market value and market share, Tesco (TSCO), reiterated the full-year targets it set a couple of months ago as it published a solid first-quarter trading update.

The shares edged up 4p or 1.4% to 307p as analysts and investors digested the detail of the update.


For the 13 weeks to 25 May, Tesco reported UK and Ireland sales of £14.33 billion, an increase of 3.6% on a like-for-like basis, although these figures were let down slightly by the Booker wholesale operation which posted a 1.3% drop in turnover.

Core UK like-for-like revenue was up 4.6% to £11.37 billion as the firm grew its market share at the fastest pace in two years supported by 15 consecutive periods of switching gains according to figures from retail consultant Kantar.

Food sales rose 5% during the quarter thanks to strong volume growth, particularly in fresh produce, driven by its Aldi Price Match and Clubcard offers, while inflation continued to decline during the period.

Sales of its upmarket Finest range were up 12.5% due to continued net switching gains from Marks & Spencer (MKS) and Waitrose, and the firm has just launched a new Dine-In range ahead of the ‘summer of sport’.

Booker revenue dipped to £2.23 billion due to a reduction in tobacco distribution and exiting less profitable contracts during the period, although ultimately both developments should help group margins in the long run.

Chief executive Ken Murphy declared himself ‘very happy with the progress we’ve made’ and claimed Tesco was ‘the most competitive we’ve ever been, with our value, product quality and service driving better brand perception and customer satisfaction’ as shown by the level of switching from rival retailers.


Shore Capital’s head of consumer research Clive Black commented: ‘With little new space and against tough inflation-fuelled comparatives, Tesco is gaining UK market share, which we see as especially commendable.

‘Unsurprisingly, group guidance is unchanged early doors, so we do not change our estimates. Trading on a FY25 PE (price-to-earnings) ratio of 11.7x, an EV/EBITDA (enterprise value to earnings before interest, tax, depreciation and amortisation) multiple of 6.7x with a yield of 4.3%, and well into its buyback programme, we believe Tesco is now an accomplished cash compounder.’

Jefferies analyst James Grzinic added: ‘As broadly anticipated by industry market share data, Tesco’s Q1 sales show a strong trajectory. This should come as little surprise to a market well aware of these dynamics.

‘We continue to focus on the attractions of Tesco: a strengthening competitive moat driving share gains in a UK market with stable food inflation and ongoing mix/volume rebuild, all in the face of a consensus view with scope for upgrades later in the year.’


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Issue Date: 14 Jun 2024