2nd Oct 2025 08:59
(Alliance News) - Tesco PLC on Thursday raised profit guidance after a better-than-expected first half, with the good weather helping to shrug off the impact of rising costs and intense competition.
"Competitive intensity remains elevated. However, in the first half, a better-than-expected customer response to our actions and the benefit of an extended period of good weather have helped offset the cost of our investments," the Welwyn Garden City, England-based food retailer said.
Pretax profit fell 6.3% to GBP1.31 billion in the 26 weeks to August 23 from GBP1.39 billion a year ago.
But adjusted operating profit rose 1.5% to GBP1.67 billion from GBP1.65 billion, beating Visible Alpha consensus of GBP1.56 billion, while adjusted diluted earnings per share jumped 6.8% to 15.43 pence from 14.45p.
Reflecting the better-than-expected performance, Tesco raised full year adjusted operating profit guidance to GBP2.9 billion and GBP3.1 billion, up from the previous range between GBP2.7 billion and GBP3.0 billion.
Shares in Tesco rose 2.4% to 440.20 pence in London on Thursday morning.
Revenue climbed 3.6% to GBP36.04 billion from GBP34.77 billion, with group sales, excluding VAT and fuel, up 5.1% to GBP33.05 billion from GBP31.46 billion.
Group like-for-like sales increased 4.3%, with growth across all markets.
Like-for-like sales grew 4.9% in the UK, by 4.8% in the Republic of Ireland, by 1.7% at Booker and 3.4% in Central Europe.
In the UK & ROI, operating profit rose 2.1% to GBP1.47 billion with volume-driven market share gains, good weather and Save to Invest progress offsetting investment in pricing and operating cost inflation.
Booker operating profit rose 0.6% benefiting from the good weather but fell 11% in Central Europe reflecting "targeted price investments" to counter competitive pressures.
Chief Executive Ken Murphy said he was "pleased" with the first half performance.
"Sales have grown across all our businesses, with customer satisfaction scores improving once again."
But he noted: "Competitive intensity remains high, and with continued pressure on household budgets, we remain committed to ensuring customers get the best possible value by shopping at Tesco."
Tesco said UK market share rose 77 basis points to 28.4% year-on-year, having grown for 28 consecutive four-week periods, while ROI share was up 11bps to 23.7%.
The market share gains in the UK were a "particular highlight", Murphy said, reflecting the "decisive action we took at the start of the year to further invest in value, quality and service."
Sales of its premium range Finest increased 16%, while online sales jumped 11% driven by growth in orders per week.
Free cash flow improved 2.9% to GBP1.30 billion from GBP1.26 billion, while net debt fell 3.8% to GBP9.88 billion from GBP9.52 billion.
Tesco said it is "committed to doing everything we can to keep prices down and deliver great quality, service and availability for our customers, and are making good progress towards our GBP500 million Save to Invest target, helping to mitigate the impact of increased cost inflation."
The FTSE 100 listing declared an interim dividend of 4.80p per share, up 13% from 4.25p per share a year ago.
By Jeremy Cutler, Alliance News reporter
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