Tesco Issues Q1 Trading Statement; LFL Sales Up 4.6%

Tesco reported a 5.5% increase in Group sales (excluding VAT and fuel) at constant rates for the 13 weeks ended May 24, 2025, with like-for-like sales growth of 4.6%. UK & ROI sales reached 15.39 billion pounds, showing a 4.7% like-for-like sales increase. The company reaffirmed its fiscal year 25/26 adjusted operating profit guidance of 2.7 billion to 3.0 billion pounds and free cash flow within the 1.4 billion to 1.8 billion pounds medium-term range.

Analysis

Tesco PLC has demonstrated a robust start to its fiscal year 25/26, reporting Group sales (excluding VAT and fuel) of £16.38 billion for the 13 weeks ended May 24, 2025, an increase of 5.5% at constant exchange rates. This performance was driven by a significant Group like-for-like sales growth of 4.6%. The critical UK & ROI segment showed particular strength, with sales reaching £15.39 billion and like-for-like sales growth of 4.7%, indicating healthy consumer activity and effective market strategy in its primary markets. Importantly, Tesco reaffirmed its full-year guidance for adjusted operating profit, expecting it to be between £2.7 billion and £3.0 billion, and maintained its medium-term free cash flow guidance range of £1.4 billion to £1.8 billion. This reaffirmation, coupled with the positive sales momentum, underscores management's confidence in the company's operational execution and financial outlook, aligning with the 'strongly positive' sentiment and 'optimistic' tone indicated by market signals.

Key Decisions for Investors

• Investors should consider the reported 4.6% group like-for-like sales growth and reaffirmed full-year profit guidance as strong indicators of Tesco's operational resilience and continued market leadership.
• The robust 4.7% like-for-like sales growth in the core UK & ROI market suggests sustained consumer demand and successful execution, which may support a positive re-evaluation of existing positions or new investment considerations.
• The reaffirmation of free cash flow guidance between £1.4 billion and £1.8 billion provides a basis for assessing Tesco's potential for future dividend payments, share buybacks, or strategic growth investments.