Tesco set to report stronger-than-expected progress, says investment bank as it digs into the primary data

Citi projects Tesco's Q1 2026 UK like-for-like sales to increase by 4.6%, surpassing the 3.6% consensus estimate due to strong consumer demand, with Republic of Ireland sales expected to rise 4.0%. Booker's growth is projected at 0.8%, offset by labor cost pressures, resulting in a total UK and Ireland like-for-like sales increase of 4.0%, exceeding the 2.9% consensus. Citi maintains a "Buy" rating on Tesco shares with a price target of 395p, anticipating an annual operating profit of £2.9 billion, within Tesco’s guidance.

Analysis

Investment bank Citi anticipates Tesco PLC will report stronger-than-expected Q1 fiscal 2026 performance, with UK like-for-like (LFL) sales projected to increase by 4.6%, significantly above the 3.6% consensus estimate from Visible Alpha. This anticipated outperformance is attributed to robust consumer demand observed over March, April, and May, as indicated by Kantar data. Sales in the Republic of Ireland are also expected to be solid, with a forecast LFL growth of 4.0%, aligning with market expectations and supported by strong customer retention and modest inflation. Tesco’s wholesale division, Booker, is projected for a more modest 0.8% growth, influenced positively by favorable weather but tempered by structural labor cost pressures. Consequently, total LFL sales for the UK and Ireland are forecast at 4.0%, surpassing the 2.9% consensus. Central European operations are anticipated to grow LFL by 3.2%, closely tracking the 3.3% market estimate, contributing to an overall global retail sales increase of 3.9%. Citi maintains its full-year earnings margin forecast for Tesco at 4%, consistent with market expectations, which translates to a projected annual operating profit of £2.9 billion, placing it comfortably within Tesco’s own guidance range of £2.7–£3.0 billion. Citi has reiterated its "Buy" rating on Tesco shares with a price target of 395p, while the shares currently trade flat at 388.2p.

Key Decisions for Investors

• Investors should note Citi's positive outlook and above-consensus Q1 sales forecasts for Tesco, particularly in the UK, which could serve as a catalyst if confirmed by the upcoming results on June 11th.
• Consider monitoring the actual like-for-like sales figures, especially the UK performance relative to Citi's 4.6% projection, and any management commentary on consumer demand sustainability and the ongoing impact of structural labor costs on Booker's profitability.
• Given Citi's maintained 'Buy' rating and a price target of 395p against a current share price of 388.2p, investors might evaluate the potential for modest upside, while continuing to assess Tesco's ability to achieve its full-year operating profit guidance of £2.7–£3.0 billion and maintain the guided 4% earnings margin.