Tesco stock fell more than 2% on Thursday, trading around 445p, after the UK’s biggest grocer posted first-quarter sales growth that came in below analyst expectations.
UK like-for-like sales rose 1.8% for the 13 weeks ended May 30. That landed at the bottom of the consensus range and roughly 50 basis points below Visible Alpha estimates. It was a sharp step down from the prior year’s pace.
CEO Ken Murphy was quick to play it down. He told reporters the result was heavily influenced by weather, pointing out that last year’s comparable period had “outstanding” conditions that gave the business an unusually strong boost.
“I wouldn’t be reading too much into it,” Murphy said.
Group like-for-like sales also grew 1.8%, reaching £16.83 billion. UK food sales were up 2.6%, with fresh food climbing 3.6%, the stronger end of the result.
Broker Bernstein backed the CEO’s view, describing the slowdown as a likely seasonal and temporary effect. It pointed to easing food inflation, tougher year-on-year comparisons, and softer non-food demand as the main factors — not any structural weakness in Tesco’s competitive position.
The wholesale division Booker was another soft spot. Like-for-like sales there fell 3.2%, worse than the 2.4% decline analysts had pencilled in.
Core retail sales at Booker dropped 1.5%, partly reflecting the exit of a major national account. Catering sales slid 3.3%, which Tesco put down to weather effects and Easter timing.
Despite the headline miss, Tesco left its full-year guidance unchanged. The group still expects adjusted operating profit of between £3 billion and £3.3 billion, and free cash flow of £1.5 billion to £2 billion for 2026/27.
Outside the UK, Tesco’s Republic of Ireland business posted like-for-like growth of 3.3%, ahead of expectations. Central Europe grew 0.8%. Online sales across the international division jumped 17.4%.
Customer satisfaction also moved in the right direction. Tesco’s UK net promoter score rose six points year-on-year. The group extended its Aldi Price Match initiative into its convenience store estate as part of its push on value.
Tesco flagged that the conflict in the Middle East had not yet materially affected trading, though it acknowledged the situation could add to inflationary pressures later in the year.
On the buyback front, Tesco has repurchased £341 million of its own stock since launching a £750 million programme in April.
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