Tesco shares sank on Thursday after the grocer delivered a festive trading statement that missed expectations and exposed the vulnerability of the stock’s valuation after a strong run through 2025.
On the face of it, Tesco had a reasonable festive trading period, prompting the supermarket giant to upgrade its profit outlook to the upper end of its £2.9bn to £3.1bn operating profits guidance as it achieves its highest UK market share in over a decade.
The retailer’s market share rose 23 basis points to 28.7%, whilst the 4-week share climbed 31 basis points to 29.4%. This outperformance was driven by volume and value growth ahead of the market.
Fresh food proved a standout category during the festive period, with like-for-like sales up 6.6%, while the premium Finest range achieved 13.0% sales growth, with party food up 22%.
Online sales grew 11.2%, boosted by extended Christmas Eve deliveries, whilst rapid delivery service Whoosh surged 47%. The non-food division also performed well, with Home & Clothing like-for-like sales up 2.1%.
However, retail sales growth missed expectations, and investors dumped the stock on Thursday.
“Tesco posted a softer-than-expected Christmas trading update, signalling that growth is becoming harder to sustain in a more price-sensitive consumer environment,” said Lale Akoner, global market analyst for eToro.
“UK like-for-like sales missed market expectations, reflecting cautious household spending and intensifying competition from discounters, which triggered a sharp negative share price reaction.”
Booker played a part in the disappointment on Thursday, delivering mixed results, with core catering sales up 2.4% supported by specialist merchant Venus. However, core retail sales declined 0.4%, impacted by approximately 200 basis points from a lower-margin national account contract ending in August, alongside continued tobacco market weakness.
“Tesco’s share price had a great 2025, but it was accompanied by a sharp increase in its valuation,” explained Chris Beauchamp, Chief Market Analyst at IG.
“The consequence of this has been clear this morning. Simply reporting good numbers isn’t enough to avoid a share price fall, and having fallen short on Q3 sales investors have been given a reason to sell and await a better set of figures.”