UK's Tesco's sales up 5.1% in H1 as profit, market share strengthen

The adjusted operating profit rose 1.6 per cent at constant rates to £1.67 billion (~$2.25 billion), while adjusted diluted earnings per share climbed 6.8 per cent to 15.43 pence. The company declared an interim dividend of 4.8 pence, up 12.9 per cent YoY.

Tesco’s UK and Return on Investment (ROI) division posted an adjusted operating profit of £1.47 billion, up 2.1 per cent, while Booker delivered £162 million, up 0.6 per cent. Central Europe declined 11.2 per cent to £44 million. Free cash flow rose 2.9 per cent to £1.3 billion, reflecting strong sales and disciplined capital management. Net debt increased to £9.88 billion due to share buybacks, maintaining the net debt/EBITDA ratio at 2 times, Tesco PLC said in a press release.

Customer satisfaction strengthened further, with UK market share up 77 basis points (bps) YoY to 28.4 per cent and Republic of Ireland share rising 11 bps to 23.7 per cent. Brand perception improved by 96 bps, with gains in satisfaction, value, and quality, outperforming competitors across all six YouGov measures. Tesco also enhanced its price position, particularly on frequently purchased items, and achieved its highest net promoter score in six years.

Supporting sustainability, Tesco introduced around £10 million in incentives for more than 400 UK farmers to encourage environmental and animal welfare progress. Additionally, Insurance and Money Services recorded an adjusted operating profit of £100 million, up £6 million YoY, supported by partnership income and cost control.

“I am pleased with our first half performance, which builds on already strong momentum. Our market share gains in the UK are a particular highlight and reflect the decisive action we took at the start of the year to further invest in value, quality and service,” said Ken Murphy, chief executive at Tesco. “The extension of our savings programme is helping offset new operating cost inflation, including increased National Insurance and other regulatory costs. Sales have grown across all our businesses, with customer satisfaction scores improving once again.”

“The steps we have taken to keep prices down for customers have improved our price position relative to the market. We have continued to enhance quality across all our ranges, including Finest, which is now in its third year of double-digit sales growth. Our summer ranges also benefited from over 470 new products, and we continued to deliver market-leading availability,” added Murphy.

Looking ahead, Tesco raised its full-year adjusted operating profit guidance to £2.9–£3.1 billion, up from £2.7–£3.0 billion, while maintaining its free cash flow forecast of £1.4–£1.8 billion.

“We are also continuing to invest in our long-term growth, leveraging technology to drive more personalised engagement through Clubcard and deeper retail media reach across channels and suppliers. Our online business is going from strength to strength, enhanced by the recent launch of F&F online and continued growth in Whoosh, our rapid delivery service,” said Murphy.

“Competitive intensity remains high, and with continued pressure on household budgets, we remain committed to ensuring customers get the best possible value by shopping at Tesco. As we continue to invest, we are creating sustainable value for all our stakeholders. Our colleagues are central to everything we do, and I would like to thank them all for the role they have each played in delivering for our customers,” he concluded.

ALCHEMPro News Desk (SG)