Tesco financial expectations
Tesco is expected to see slightly lower revenue and net income:
Revenue: £34.67 billion, slightly lower than the £35.18 billion in the same period a year ago
Net income: £975 million, down around 10% compared to a year ago
Earnings per share (EPS): 14 pence, similar to the same period last year
In its first quarter (Q1) of 2025/26, Tesco delivered solid like-for-like sales growth in its major markets, with its UK & rate of return (ROI) business showing strong performance across both food and non-food categories.
Central Europe also contributed positively to the overall performance, demonstrating the benefits of Tesco’s diversified geographic and format portfolio during challenging market conditions.
UK market share has edged higher, underscoring Tesco’s capacity to hold ground – and even make gains – in what remains an intensely competitive grocery sector.
The retailer’s value proposition, bolstered by pricing investments and improvements in product and quality perception, has been central to maintaining customer loyalty even as inflation and input costs affect margins.
Competitive intensity weighs on profit outlook
That said, investors will be scrutinising earnings for signs that Tesco can sustain its momentum in the face of rising competition, cost headwinds, and uncertain consumer behaviour.
Profit guidance issued earlier in the year projected a dip in adjusted operating profit for 2025/26 compared to 2024/25, reflecting Tesco’s acknowledgement of growing competitive intensity and cost pressures.
Cost inflation driven by labour, packaging, and regulatory burdens continues to weigh on operations, and margins may be squeezed, particularly if Tesco feels pressure to match rivals on pricing.
The grocery sector’s price war dynamics create challenges for all operators, as market share gains often come at the expense of profitability in the near term.
Key performance areas under investor focus
Also of interest will be how Tesco’s non-UK divisions perform, how discounting and promotions are managed, and how online and convenience channels fare amid changing shopping patterns.
Whether there are any updates to its outlook for free cash flow, capital expenditure or shareholder returns will be important for investors assessing the company’s capital allocation priorities.
The market will likely reward any signs of stabilisation or small improvements in margin performance, while weak revenue or pessimistic guidance could lead to renewed investor concern.
Margin pressure remains central concern
The grocery sector continues to face margin pressure from multiple sources, including aggressive competition from discount retailers and the need to invest in price competitiveness to maintain market share.
Tesco’s ability to balance pricing investments with operational efficiency improvements will be crucial for maintaining profitability while defending and growing market position.
Supply chain efficiency and procurement advantages from Tesco’s scale provide some protection against cost inflation, though these benefits may be offset by competitive pricing requirements.
The company’s focus on operational excellence and cost discipline will be tested as external pressures continue to challenge traditional grocery retail margins.
Strategic priorities and market positioning
Tesco’s strategic focus on customer value, convenience, and operational efficiency continues to underpin its market leadership position, though execution remains challenging in the current environment.
The integration of digital and physical operations provides competitive advantages, as customers increasingly expect seamless omnichannel experiences from major retailers.
Investment in technology, supply chain capabilities, and store network optimisation supports long-term competitiveness while creating near-term cost pressures that affect reported profitability.
Customer loyalty programmes and data-driven personalisation have become increasingly important tools for maintaining competitive differentiation in the commoditised grocery market.
Tesco analyst ratings and technical analysis
According to LSEG Data & Analytics, analysts rate Tesco as a ‘buy’ with a mean long-term share price target at 446 pence, around 3% above the current share price (as of 25 September 2025).
Tesco LSEG Data & Analytics chart