Tesco PLC (TSCO.L) — Company Research

Last Updated: 20 Jul 2026

Tesco PLC is the United Kingdom's largest grocery retailer, with a UK market share of 28.5% at its 2025/26 year end — the highest level it has held in a decade. Beyond the UK it operates in the Republic of Ireland and Central Europe, runs the Booker wholesale business supplying independent retailers and caterers, and owns the dunnhumby data science business and an Insurance & Money Services arm. In the 53 weeks to 28 February 2026 it reported statutory revenue of £73,712m and adjusted operating profit of £3,152m on a comparable 52-week basis. The financial year just started has opened into a materially more competitive UK market. This report sets out what the company has published, with no analyst opinions and no price targets.

1. Company Snapshot

2. Bull and Bear Case

Bull Case

• Market share at a ten-year high: UK share reached 28.5%, up 24bps in the year and up 122bps across three years, with December 2025 the highest share in a decade. Group like-for-like sales grew 3.5% and UK like-for-like sales 4.2%, with growth in every channel.
• Cash generation is improving faster than profit: free cash flow rose 11.8% to £1,957m against adjusted operating profit growth of just 0.8%, driven by a £385m working capital inflow, and management upgraded its medium-term free cash flow guidance range to £1.5–2.0bn from £1.4–1.8bn.
• Capital returns are substantial and ongoing: £937m of dividends were paid and the £1.45bn buyback announced in April 2025 was completed, with a further £750m buyback announced to run to April 2027. Since October 2021 Tesco has returned £4.3bn through buybacks at an average price of 317p.
• Online is compounding: UK online sales grew 11.2% to £7.5bn including around 2ppts from the Tesco Whoosh rapid delivery service, online market share rose 30bps to 35.7%, and delivery saver subscribers rose 7.6% to 834,000.
• Cost programme is funding the price investment: around £535m was delivered through the Save to Invest programme in the year, which together with sales growth offset investment in the customer offer, National Insurance increases and the new Extended Producer Responsibility levy.

Bear Case

• Competitive intensity has stepped up sharply: Asda signalled the start of a potential price war and Tesco shares fell more than 16% on the news. Ken Murphy has said the group sees "a further increase in the competitive intensity of the UK market", and has tied his own 2026/27 bonus to market share.
• Growth slowed materially in the new year: in the Q1 trading statement of 18 June 2026, covering the 13 weeks to 30 May 2026, group like-for-like sales grew only 1.0% against 3.5% for the prior full year, with UK like-for-like up 1.8%.
• Booker is going backwards: Booker like-for-like sales fell 3.2% in Q1 2026/27, having grown just 0.2% in FY2025/26, with the exit of a lower-margin national contract cited as part of the reason.
• Margin is drifting down: group adjusted operating margin fell 12bps to 4.3%, with UK & ROI down 15bps to 4.7%. Profit grew 0.8% while sales grew 4.6% — the gap is the cost of holding share.
• Net debt rose while the buyback continued: net debt increased £1,109m to £(10,563)m and net debt/EBITDA moved from 2.0x to 2.1x, with lease liabilities up £168m and the prior year having benefited from around £700m of Banking disposal proceeds that were returned to shareholders.

3. Business Segments

Segment percentages are calculated on the 52-week comparable sales basis (excluding VAT and fuel) of £66,588m used in the company's own segmental disclosure.

4. Business Model and Moat

How it makes money. Tesco buys food and general merchandise at scale and resells it at a thin margin across a very large volume base. Group adjusted operating margin was 4.3% in 2025/26 on £66,588m of sales. Profit therefore comes from throughput and buying terms rather than from pricing power over the customer. Booker adds a wholesale channel at an even thinner 3.2% margin, while Insurance & Money Services and dunnhumby contribute higher-margin income that is small in absolute terms but does not require store capital.

Why scale is the moat. Being the largest buyer in a market where the top four players hold most of the volume gives Tesco lower unit costs than any UK competitor except the discounters, and it can convert that advantage into price without giving up as much margin as a smaller rival would. Its response to competitive pressure has been exactly that: Everyday Low Prices was expanded from 1,000 to 3,000 products in January 2026, alongside Aldi Price Match on over 600 lines, with more than 10,000 products cheaper at the year end than at the start at an average reduction of 9.5%.

The Clubcard and data layer. Clubcard Prices creates a two-tier price architecture that rewards identified customers and generates the transaction data that dunnhumby monetises. This is what allows targeted rather than blanket price investment, and it is the mechanism by which Tesco has been able to gain share while growing profit, if only slightly.

Where the model is fragile. The moat is a cost moat, not a switching-cost moat. Grocery customers face no barrier to shopping elsewhere, and a determined competitor with a different owner's cost of capital can compress industry margins for as long as it chooses to. That is the pressure the group is now facing, and it is why FY2026/27 adjusted operating profit is guided to a wide £3.0–3.3bn range against £3,152m delivered.

5. Financial Health

All figures below are taken from Tesco's Preliminary Results announcements for 2025/26 (15 April 2026), 2024/25, 2023/24 and 2022/23, and from the Interim Results 2025/26 of 2 October 2025. Statutory revenue is stated excluding VAT and including fuel.

GAAP EPS and Adjusted EPS are stated on a diluted basis. † From continuing operations; the Banking operations were treated as a discontinued operation in FY2024/25 and there are no discontinued operations in FY2025/26. FY2021/22 and FY2022/23 per-share figures are as reported at the time and are not restated for that reclassification, so they are not directly comparable with later years. FY2025/26 statutory figures reflect a 53-week reporting period while the alternative performance measures are presented for the 52 weeks to 22 February 2026. Net debt is Tesco's own definition and includes lease liabilities; the FY2023/24 comparative is not restated on the current basis in the sources reviewed and is shown as unavailable.

Tesco reports statutory results half-yearly, with trading statements in between. The table below shows the most recent period first; second-half figures are derived as the full year less the reported first half.

§ Derived as the reported full year less the reported first half. Tesco does not publish a standalone second-half statement.

Cash flow and balance sheet. Retail adjusted operating profit of £2,985m plus depreciation and amortisation of £1,764m and a £385m working capital inflow underpinned free cash flow of £1,957m on a 52-week basis, after cash capital expenditure of £(1,515)m. Capital expenditure on the company's ongoing-business definition was £1,511m, up £54m, with statutory capital expenditure of £1.7bn including property buybacks and store purchases. Guidance for 2026/27 is around £1.6bn of capital expenditure. Net debt of £(10,563)m includes lease liabilities, with net debt before lease liabilities of £(2,679)m. Free cash flow more than covered the £(750)m of buyback outflows and £(937)m of dividends paid during the year. Amortisation of acquired intangibles, principally from the Booker merger, was £(78)m and is treated as an adjusting item.

6. Valuation Metrics

Raw metrics, July 2026. Not opinions on whether the stock is cheap or expensive.

Price action alongside these fundamentals can be tracked with the ChartsView Live Charts tools, and UK consumer data releases are listed on the Economic Calendar.

7. What Are They Building

The stated ambition is 30% of UK grocery sales, and the 2026/27 executive bonus has been tied to market share to reinforce it. The operational programme behind that is price and availability rather than expansion: Everyday Low Prices was widened from 1,000 to 3,000 lines in January 2026, Aldi Price Match covers more than 600 lines, and over 2,000 new and improved products were launched during the year including a large-scale refresh of the frozen range.

The physical estate is still growing selectively. Tesco opened 77 stores in the UK, nine in the Republic of Ireland and seven in Central Europe during 2025/26, and refreshed 300 stores across the group. Four new superstores and five Express stores opened in Ireland alone.

The technology programme is where incremental capital is going. Management has flagged warehouse automation and electronic shelf-edge labels as high-returning projects within the roughly £1.6bn of capital expenditure planned for 2026/27, alongside distribution network optimisation. Tesco Whoosh rapid delivery now covers 73% of UK households and contributed around 2ppts of the 11.2% online sales growth. Tesco Marketplace, the third-party seller platform, more than doubled average weekly traffic and grew average basket spend by around 90% before migrating to the Mirakl platform.

8. Peer Comparison

9. Insider Activity

Chief Executive Ken Murphy and the wider executive team received shares on the release of the 2021 Long-Term Incentive Plan on 3 July 2026. As is standard for UK LTIP vestings, a large portion of the gross award was withheld to cover income tax and National Insurance, and several participants sold the balance in the market on the same day. For Ken Murphy and Chief Financial Officer Imran Nawaz, the net shares are subject to a post-vesting holding period until 3 July 2028, so neither sold. The transactions below are plan-driven rather than discretionary and should be read as such.

10. Key Risks

• Price war risk: a sustained discounting campaign by Asda or another major competitor would compress industry margins irrespective of Tesco's own execution. Adjusted operating margin already fell 12bps to 4.3% in a year of strong sales, and the shares fell more than 16% on the initial signal of intensified competition.
• Demand and household spending risk: the company explicitly flagged that its FY2026/27 guidance depends on economic conditions affecting household spending, and the £3.0–3.3bn adjusted operating profit range is wide enough to accommodate a materially weaker outcome than the £3,152m just delivered.
• Slowing momentum: Q1 2026/27 group like-for-like sales growth of 1.0% is a sharp deceleration from 3.5% for the prior full year, and Booker like-for-like sales fell 3.2% in the quarter.
• Cost inflation risk: the year absorbed increased National Insurance contributions and the new Extended Producer Responsibility levy. The Save to Invest programme delivered around £535m of savings to offset these; if the savings run rate slows while statutory cost inflation continues, the offset disappears.
• Balance sheet and lease risk: net debt rose £1,109m to £(10,563)m while £750m of buybacks and £937m of dividends were paid, taking net debt/EBITDA to 2.1x within a stated target range of c.2.8–2.3x. Lease liabilities rose £168m on renewals and extensions.
• Concentration risk: the UK and Republic of Ireland provide the large majority of both sales and profit, so there is limited geographic diversification to absorb a downturn in the domestic market.

11. Recent Developments

• 06 Jul 2026 — Long-Term Incentive Plan 2021 releases disclosed. Tesco published PDMR notifications covering the 3 July 2026 release of the 2021 LTIP, including 1,291,639 gross shares to Ken Murphy and 627,003 to Imran Nawaz at £4.666, with net shares for both subject to a holding period until 3 July 2028.
• 18 Jun 2026 — Q1 2026/27 trading statement. For the 13 weeks to 30 May 2026, group like-for-like sales grew 1.0% and UK like-for-like sales 1.8%, with food up 2.6% and fresh food up 3.6%. Booker like-for-like sales fell 3.2%. Full-year guidance of £3.0–3.3bn adjusted operating profit and £1.5–2.0bn free cash flow was maintained.
• 15 Apr 2026 — Preliminary Results 2025/26 published. Statutory revenue of £73,712m was up 5.4%, adjusted operating profit £3,152m up 0.8%, free cash flow £1,957m up 11.8%, and adjusted diluted EPS 29.0p up 6.0%. A final dividend of 9.7p took the full-year dividend to 14.5p, and a new £750m share buyback was announced to complete by April 2027.
• 15 Apr 2026 — Medium-term free cash flow guidance upgraded. The range was raised to £1.5–2.0bn from £1.4–1.8bn, reflecting management confidence in future cash generation.
• Jan 2026 — Everyday Low Prices expanded from 1,000 to 3,000 products. The expansion sat alongside Aldi Price Match on over 600 lines and weekly Clubcard Prices, with over 10,000 products cheaper at the year end than at the start at an average reduction of 9.5%.
• Dec 2025 — UK market share reached a decade high. Share peaked during the month on the way to a 28.5% year-end position, up 24bps year on year and up 122bps over three years.
• 02 Oct 2025 — Interim Results 2025/26. Statutory revenue of £36,036m was up 3.6%, adjusted diluted EPS 15.43p up 6.8%, and the interim dividend was raised 12.9% to 4.80p.

12. Key Dates

• 18 Jun 2026 — Q1 2026/27 trading statement published, covering the 13 weeks to 30 May 2026
• 03 Jul 2026 — Long-Term Incentive Plan 2021 release date; holding period for executive directors runs to 3 July 2028
• Expected Oct 2026 — Interim Results 2026/27 for the 26 weeks to late August 2026, the next scheduled reporting event
• Expected Nov 2026 — 2026/27 interim dividend payment, following the FY2025/26 pattern
• Expected Jan 2027 — Christmas trading statement covering the festive period
• Expected Apr 2027 — Preliminary Results 2026/27, and the stated completion date for the £750m share buyback announced in April 2026

Discussion of Tesco and the wider UK grocery sector takes place in the ChartsView Forum.

Disclaimer: This research is produced by ChartsView for educational and informational purposes only. It does not constitute financial advice or a recommendation to buy or sell any security. All information is sourced from publicly available company filings, press releases, and official data. ChartsView does not use analyst opinions or third-party ratings. Always conduct your own due diligence and consider your personal financial situation before making investment decisions. Past performance is not indicative of future results.