Tesco Shares Rise After Full-Year Profit Guidance Increase

Tesco (LON: TSCO) shares gained almost 2% in early Thursday trading after the supermarket giant raised its full-year profit forecast, following robust half-year financial results that exceeded expectations.

The retailer now expects retail adjusted operating profit for the 2024/25 financial year to reach around £2.9 billion, up from the previous guidance of “at least £2.8 billion.”

The upward revision reflects Tesco's volume growth in the first half, which was ahead of its expectations.

Tesco reported a 3.5% increase in group sales to £31.46 billion for the first half of the year, alongside a 15.6% rise in adjusted operating profit, reaching £1.65 billion.

In its core retail division, profit climbed by 9.7% to £1.55 billion, driven by strong performance in the UK and Republic of Ireland (ROI) markets.

“We've been working really hard to offer our customers the best possible value, quality, and service and they are shopping more at Tesco as a result,” said Chief Executive Ken Murphy.

He highlighted Tesco's pricing strategy, which includes matching Aldi's prices on over 700 items and offering more than 8,000 weekly deals through the Clubcard loyalty program. The efforts have helped Tesco retain its position as the cheapest full-line grocer in the UK for nearly two years.

Furthermore, the retailer has grown its market share. In the first half, Tesco gained 62 basis points (bps) in the UK and 88 bps in the ROI. Volume-driven growth, particularly in the UK and ROI, contributed to a 2.9% increase in like-for-like sales.

Tesco also reaffirmed its commitment to returning capital to shareholders. The company has already repurchased £575 million worth of shares in the first half, part of a larger £1 billion buyback program set to be completed by April 2025.

Looking ahead, Tesco remains confident in its financial outlook. Alongside the revised profit forecast, it expects to generate retail free cash flow between £1.4 billion and £1.8 billion for the year.