Tesco Q1 sales rise 5.5% on food, online growth across all regions

Tesco reported a 5.5% increase in group like-for-like sales for Q1 2025-26, with UK sales rising 5.7% to £12.31 billion and Republic of Ireland sales increasing 7.2% to £772 million. Booker, Tesco’s wholesale business, reported a 3.5% sales increase to £2.31 billion. The company maintained its full-year guidance, projecting adjusted operating profit between £2.7 billion and £3 billion and retail free cash flow between £1.4 billion and £1.8 billion, while also noting it has repurchased £448 million in ordinary shares as part of its £1.45 billion buyback program.

Analysis

Tesco (LON:TSCO) reported a robust first-quarter performance for the 2025-26 financial year, with group like-for-like sales, excluding fuel and VAT, increasing by 5.5% to £16.38 billion. This growth was broad-based, evidenced by a 5.5% rise in U.K. and Republic of Ireland like-for-like sales to £15.39 billion, with the U.K. specifically showing a 5.7% increase to £12.31 billion and the Republic of Ireland a stronger 7.2% growth to £772 million. The Booker wholesale division also contributed positively, with sales up 3.5% to £2.31 billion, driven by a 7.3% surge in core catering and a 5.4% rise in core retail, despite a 9% decline in tobacco sales which moderated Booker's overall like-for-like growth to 2%. Central European operations also performed well, delivering 5.8% like-for-like sales growth at constant rates to £997 million, with notable strength in fresh food (up 7.3%). The company's strategy of targeted price investments and the introduction of a margin cap on selected products appears to be yielding results in a competitive market, supporting U.K. food sales growth of 5.9% and an increase in non-food sales. Furthermore, Tesco's focus on innovation, with over 350 new own-brand products, and a significant 11.5% expansion in U.K. online sales, bolstered by increased capacity and the online launch of its F&F clothing brand, underscore its adaptability. This operational strength is reflected in consistent market share gains; U.K. market share rose by 44 basis points year-over-year to 28.0%, marking the 24th consecutive four-week period of growth, and U.K. online grocery market share stood at 37.1%. Brand perception also improved, increasing by 65 basis points in the U.K. according to YouGov BrandIndex. Despite a 10.6% decline in U.K. fuel sales, which tempered combined U.K. revenue growth (including fuel) to 3.1%, Tesco maintained its full-year guidance for adjusted operating profit between £2.7 billion and £3 billion and retail free cash flow between £1.4 billion and £1.8 billion. The company is also actively returning capital to shareholders, having repurchased £448 million in shares under its ongoing £1.45 billion buyback program, reinforcing a strongly positive sentiment around this update.

Key Decisions for Investors

• Investors should view Tesco's consistent market share gains across multiple segments and its strong online sales growth as key indicators of resilient operational performance and effective strategy execution in a competitive retail environment.
• The maintained full-year guidance, coupled with the active share repurchase program amounting to £448 million since April, signals management's confidence and commitment to shareholder returns, though the ongoing impact of price investments on margins warrants continued monitoring.
• While the 10.6% decline in U.K. fuel sales presents a minor headwind, the robust underlying growth in core grocery (U.K. food sales +5.9%) and wholesale (Booker core catering +7.3%) suggests that strategic focus on these areas is effectively navigating competitive pressures and supporting overall group performance.