Tesco shares could have further to run after the supermarket reported rising sales and increased its profit guidance for the year.
After a strong run for the stock so far in 2025, today’s update had the potential to spark a wave of profit-taking.
However, Tesco marginally beat profit estimates as sales rose 5.1% driving a 1.6% increase in operating profit.
The firm said it now expects FY 25/26 group adjusted operating profit to be between £2.9bn and £3.1bn, compared to the previous guidance of between £2.7bn and £3.0bn. This appears to be positive enough for investors and shares were 2.2% higher.
“Tesco’s stores and vans have delivered a little extra in the first half. Underlying operating profit of £1.7 billion came in a shade ahead of market forecasts, but intensified competition and cost pressures meant that growth in profits lagged sales by some margin,” explained Derren Nathan, head of equity research, Hargreaves Lansdown.
“Still, management were confident enough to raise the mid-point of full-year profit guidance by 5% to £3.0 billion. It’s not a spectacular change, but every little helps.”
Tesco’s all important market share increased to 28.4% demonstarting to the market that measures undertaken to fight off the discounters are paying off.
“Market share continues to expand and patient shareholders have been rewarded with a boost to the dividend,” said Chris Beauchamp, Chief Market Analyst at investment and trading platform IG.
“In the short-term the steady gains in the share price might be due a breather, but today’s update confirms the UK’s dominant supermarket remains in good health.”
Trading. at around 15x earnings, Tesco shares still don’t look expensive, even after a 19% year-to-date rally.