Tesco (LON:TSCO) Posts Quarterly Earnings Results

Key Points

• Tesco delivered a strong first half: Group sales increased 1.6% at constant rates, adjusted operating profit rose 6.3%, EPS grew 12.2%, and free cash flow reached £1.57 billion. The company also increased its share-buyback allocation by £200 million to £950 million.
• The retailer raised its outlook: Tesco expects full-year adjusted operating profit to land in the upper half of its previous £3.15 billion–£3.3 billion range, supported by cost savings, product mix, Tesco Media and Whoosh growth.
• Growth is tempered by higher costs and uncertainty: U.K. online sales rose 8.4% and Whoosh sales grew roughly 37%–40%, but capital expenditure guidance increased to about £1.7 billion, with management citing budget, energy, Christmas-trading and inflation risks.

Tesco (LON:TSCO - Get Free Report) posted its quarterly earnings data on Thursday. The retailer reported GBX 17.50 earnings per share (EPS) for the quarter, Digital Look Earnings reports. Tesco had a return on equity of 16.05% and a net margin of 2.42%.

Here are the key takeaways from Tesco's conference call:

• Strong first-half financial performance: Group sales rose 1.6% at constant rates, adjusted operating profit increased 6.3%, EPS grew 12.2%, and free cash flow reached £1.57 billion. Tesco raised its share buyback by £200 million to £950 million.
• Tesco narrowed its full-year adjusted operating profit outlook to the upper half of the previous £3.15 billion–£3.3 billion range, supported by resilient consumers, cost savings, favorable product mix, and growth in Tesco Media and Whoosh.
• Digital and rapid-delivery operations showed strong momentum, with U.K. online like-for-like sales up 8.4% and Whoosh sales up about 37%–40%. Partnerships with Uber Eats and Deliveroo are attracting new customers with lower-than-expected cannibalization.
• Customer satisfaction reached a record high, while Tesco continued investing in value, quality, colleague pay, and innovation. Clubcard personalization expanded to roughly 2.5 million customers, and more than 800 new or improved products were launched.
• Tesco increased full-year capital expenditure guidance to approximately £1.7 billion, around £200 million above last year, while management cautioned that the second half faces uncertainty from the U.K. budget, higher energy bills, Christmas trading, and potential cost inflation.

Tesco Stock Performance

Shares of LON TSCO opened at GBX 503.40 on Thursday. The firm has a market capitalization of £31.36 billion, a price-to-earnings ratio of 18.58, a PEG ratio of 1.43 and a beta of 0.57. The company has a current ratio of 0.59, a quick ratio of 0.60 and a debt-to-equity ratio of 131.55. Tesco has a one year low of GBX 411.70 and a one year high of GBX 520.60. The business has a fifty day simple moving average of GBX 469.72 and a 200 day simple moving average of GBX 468.44.

Tesco News Summary

Here are the key news stories impacting Tesco this week:

• Positive Sentiment: Tesco raised the lower end of its fiscal 2027 profit outlook after reporting growth in first-half sales and profit, suggesting resilient consumer demand and improved operating momentum. Tesco lifts lower end of fiscal 2027 outlook as profit and sales grow in first half
• Positive Sentiment: The company increased its total allocation for fiscal 2027 share buybacks to £950 million. The larger capital return programme may support earnings per share and signals management confidence in cash generation. Tesco hikes fiscal 2027 share buyback allocation to £950 million
• Positive Sentiment: Reports highlighted the raised profit outlook and stronger buyback as the main catalysts behind the positive market reaction. Tesco raises profit outlook and boosts buyback
• Neutral Sentiment: Shore Capital reaffirmed its “hold” rating and set a GBX 480 price target, indicating a cautious view despite the improved outlook. Tesco hold rating reaffirmed at Shore Capital
• Neutral Sentiment: Jefferies also reiterated its “hold” rating with a GBX 480 target, suggesting analysts have not yet upgraded their valuation stance following the results. Tesco hold rating reiterated at Jefferies

Wall Street Analyst Weigh In

A number of equities analysts have recently weighed in on the stock. Shore Capital Group reaffirmed a "hold" rating and set a GBX 480 price target on shares of Tesco in a research note on Thursday. Jefferies Financial Group restated a "hold" rating and set a GBX 480 target price on shares of Tesco in a research report on Thursday. Deutsche Bank Aktiengesellschaft increased their target price on shares of Tesco from GBX 500 to GBX 525 and gave the stock a "buy" rating in a research report on Tuesday, June 23rd. Finally, JPMorgan Chase & Co. lowered their price objective on shares of Tesco from GBX 500 to GBX 490 and set an "overweight" rating for the company in a research report on Wednesday, September 2nd. Two equities research analysts have rated the stock with a Buy rating and two have given a Hold rating to the stock. According to MarketBeat, the stock currently has a consensus rating of "Moderate Buy" and a consensus price target of GBX 493.75.

Tesco Company Profile

Tesco was built to be a champion for customers, serving them every day with affordable, healthy and sustainable food. Across the Group, our purpose is at the core of what we do: serving our customers, communities and planet a little better every day. Our fantastic team of over 340,000 colleagues go above and beyond to serve our customers. We work hard to be a place where everyone is welcome, where all colleagues can be at their best and build the skills to grow their careers.