Tesco LON: TSCO executives used the company’s full-year results call to highlight market share gains, higher customer satisfaction, and cash flow that exceeded guidance, while also laying out an “evolved” strategy built around five connected ambitions.
Chief Executive Ken Murphy said Tesco delivered “our highest market share for a decade” despite “increased competitive intensity,” crediting stepped-up investment in “price, quality, and service.” He added that the company’s actions “resonated strongly with customers,” with customer satisfaction rising and “both profit and cash flow ahead of our guidance ranges.”
Market share gains and customer offer investments
Murphy said U.K. market share reached 28.5%, with a total gain of 120 basis points over the past three years. In Ireland, Tesco’s market share rose 32 basis points year-over-year to 24.2%, marking a fourth consecutive year of gains. He also said Tesco’s Net Promoter Score increased “ahead of the competition,” including an improvement in value perception.
Murphy outlined the scale of Tesco’s price investments over the past year, including:
- Tripling “everyday low prices” lines to 3,000 products
- Running “over 10,000 Clubcard prices”
- Maintaining “more than 600 Aldi Price Match lines”
He said Tesco ended the year with “over 10,000 prices lower than at the start of the period.”
On product quality, Murphy highlighted growth in the Finest range, which he said delivered 15% sales growth, helped by dine-in deals. He also pointed to new product launches, including a “Chef’s Collection” range, and said a second-half “frozen range refresh” introduced “hundreds of new and improved products across tiers.”
Financial performance and shareholder returns
Chief Financial Officer Imran Nawaz said the statutory results covered a 53-week period, while headline results were presented on a 52-week basis for comparability. On that basis, Nawaz reported:
- Group sales grew 4.3% at constant exchange rates, including 3.5% like-for-like growth.
- Group adjusted operating profit increased 0.6% at constant rates to GBP 3.15 billion.
- Headline EPS rose 6% to GBP 0.29, supported by buybacks and profit after tax growth.
- Free cash flow was GBP 1.96 billion, up 12% year-over-year and above the upper end of guidance.
Nawaz said Tesco proposed a final dividend of GBP 0.097 per share, taking the full-year dividend to GBP 0.145, up 5.8% and aligned with a policy of paying “broadly 50% of earnings.” He added that Tesco returned GBP 2.4 billion to shareholders through dividends and buybacks during the year and announced a further GBP 750 million buyback.
Tesco ended the period with net debt (including capitalized leases) of GBP 10.56 billion and net debt to EBITDA of 2.1x, which Nawaz described as a strong position that provides flexibility in uncertain times. He said Tesco’s defined benefit pension scheme remained in surplus on a technical provisions basis, with trustees agreeing that no group contributions were required.
Segment and channel highlights, including online and Whoosh
In the U.K., Nawaz said sales grew 4.9%, including 4.2% like-for-like growth. Food like-for-like rose 5.2%, with fresh food up 6.9%. He said U.K. online sales grew 11.2% and that Tesco Whoosh extended coverage to “over 70% of households,” contributing roughly two percentage points to online growth. Average weekly online orders rose 6% as the company added more delivery slots and improved its website.
Nawaz also said Tesco gained share across channels in the U.K., including 71 basis points in convenience and 30 basis points in online. In Ireland, he reported total sales growth of 6.6% (constant exchange rates), including nine store openings, and online growth of 17.4%, with national delivery coverage reaching “over 94%.”
For Booker, Nawaz reported sales up 0.6% and adjusted operating profit up 0.7%, with like-for-like sales up 0.2% despite declining tobacco sales. In Central Europe, sales rose 3.7%, while profit reflected the combined impact of sales growth, savings contributions, and lower rental income following the prior-year sale of some mall properties.
Strategy: five ambitions and expanding “capital-light” revenue streams
Murphy said Tesco has “evolved our strategic ambitions into five mutually reinforcing goals,” while emphasizing that “the strategy starts and ends with core food.” He said Tesco aims to grow Finest “well beyond GBP 3 billion in sales,” supported by “AI-powered ranging tools,” while also expanding ranges tied to consumer trends, including “Gut Sense and high-protein ranges.”
Murphy described Whoosh as “a meaningful part of our online offer,” generating “over GBP 400 million of sales,” and said it grew 51% in the U.K. during the year, with a rollout starting in Ireland. He also highlighted non-food and services areas including F&F clothing, Tesco Mobile, insurance and money services, and in-store pharmacies. On Marketplace, he said Tesco migrated its platform to Mirakl to improve seller onboarding and the customer proposition, noting Marketplace has served “over 1 million customers” and that “more than half” were new to Tesco online shopping.
On supplier partnerships, Murphy said Tesco Media ran “over 12,500 campaigns” in the last year and that “over 90% of advertisers” increased spend year-over-year. He also discussed dunnhumby as a “market leader in data science,” including use of AI-enabled tools to accelerate ranging decisions “from weeks into minutes.”
Guidance and uncertainty tied to the Middle East conflict
Nawaz said Tesco is providing a wider guidance range for the year ahead due to “increased uncertainty caused by the conflict in the Middle East.” The company expects group adjusted operating profit of GBP 3.0 billion to GBP 3.3 billion and free cash flow within its upgraded medium-term range of GBP 1.5 billion to GBP 2.0 billion. Tesco also raised its medium-term free cash flow guidance to that range from a prior range of GBP 1.4 billion to GBP 1.8 billion.
In Q&A, Nawaz said Tesco had not yet seen “any real discernible change in consumer spending behaviors,” but framed the guidance range as a way to preserve flexibility if conditions shift. He added that fuel and energy prices had increased, but said Tesco’s hedging strategy meant this would not be a near-term operating cost headwind.
Murphy closed the call by reiterating Tesco’s “commitment to keep focused on our core business, delivering great value, great quality, and consistent high standards in our stores and in our online proposition.”
About Tesco LON: TSCO
Tesco was built to be a champion for customers, serving them every day with affordable, healthy and sustainable food. Our commitment to our customers extends beyond our stores, and into every community we serve – in the UK, Republic of Ireland, Slovakia, the Czech Republic and Hungary. We invest in communities to help them thrive, through supporting schools and children's groups, food banks and other good causes.
In challenging times, our purpose has guided every part of the Group. Serving our customers, communities and planet a little better every day is what we do.
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