Tesco, Britain’s largest supermarket group, raised its full-year profit forecast on Thursday after a strong first half in which hot weather and competitive pricing helped it win market share from rivals.
The group, which holds 28.4% of Britain’s grocery market, said it now expects adjusted operating profit for the 2025/26 year in the range of £2.9 billion to £3.1 billion ($3.9–$4.2 billion).
That compares with earlier guidance of £2.7 billion to £3.0 billion. Tesco made £3.13 billion in the previous financial year.
First-half adjusted operating profit rose 1.5% to £1.67 billion, supported by a 4.9% rise in UK like-for-like sales.
Revenue for the period came in at £36.04 billion, up from £34.77 billion a year earlier.
Tesco’s share price rose by over 1.7% following the announcement.
Tesco gains market share from rivals
The supermarket chain said the gains reflected a strong customer response to price cuts and promotions, alongside an unusually long spell of warm weather in the summer months.
Tesco has reduced prices on 6,500 products, with an average cut of 9%, and has matched discounter Aldi’s prices on more than 600 items.
Industry data from market researcher Worldpanel last month showed Tesco capturing more market share than any other UK grocer.
CEO Ken Murphy said the performance was a result of “decisive action we took at the start of the year to further invest in value, quality and service.”
Shares in Tesco have risen 17% this year, buoyed by stronger-than-expected performance.
Analysts at RBC noted that the company’s strong top-line growth and market share gains boosted free cash flow, adding that food inflation—though higher than expected—had limited impact on sales volumes.
Competition remains intense
Despite its gains, Tesco acknowledged that competition remains tough.
The company’s main rivals have been under pressure, with Asda losing share despite earlier pledges of sustained price cuts.
While Tesco had initially expected profit to decline this year due to increased investment, no price war has materialised.
Analysts say Tesco’s heavy promotion of its Clubcard loyalty scheme, which offers discounts to members, has also been key to winning customers.
At the same time, the supermarket is expanding digital operations, including its online Marketplace platform and retail media services, to diversify growth.
CEO urges pro-growth budget
Murphy cautioned, however, that households remain under financial strain and that consumer confidence is being hit by concerns over the government’s upcoming budget on November 26.
“They are concerned. They are worried about the budget, they’re worried about the economic outlook, so it is definitely a thing,” he said.
Murphy called on the government to prioritise measures that would support jobs and growth.
“What we’d love to see from the next budget is a budget that’s pro-growth and pro-jobs, which, as a result, will help customers with the cost of living,” he said.
Last year’s budget added to employer payroll costs, leaving Tesco with hundreds of millions of pounds in additional expenses.
Murphy warned that any similar measures this year could weigh on the sector’s ability to sustain investment and price cuts.
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