Tesco Posts Growth in 2025/26 Preliminary Results, Announces £750m Share Buyback and Record Market Share

• UK & ROI adjusted operating profit: £2,745m, up 0.7%, margin 4.7% (-15 bps).
• Booker: £292m, up 0.7%, margin 3.2% (flat).
• Central Europe: £115m, down (0.9)% at constant rates, margin 2.5% (-10 bps). Excluding last year’s mall disposals, profit grew 8.1% at constant rates.

Statutory operating profit jumped 10.1% to £2,985m, helped by lower impairment charges this year (£53m vs £286m last year) and the extra trading week.

Cash generation, debt and dividends: the engine is humming

Free cash flow of £1,957m rose 11.8%, powered by a £385m working capital inflow and disciplined operations. Capex increased to £1,511m as Tesco leans into distribution automation, store refreshes and digital capability.

Net debt increased to £(10,563)m, primarily because last year’s c.£700m proceeds from the Banking disposal have now been returned to shareholders. Even so, leverage is comfortable at 2.1x Net debt/EBITDA, liquidity stands at £2.9bn with an undrawn £2.5bn RCF, and the pension position improved to a £220m surplus (net of tax). The dividend rises 5.8% to 14.5p.

Shareholder returns: £4.3bn since 2021 and another £750m coming

Tesco completed the £1.45bn buyback announced in April 2025 and has returned £4.3bn via buybacks since October 2021 at an average price of 317p per share. Today, it adds a fresh £750m buyback to be completed by April 2027. That, alongside the 14.5p dividend (roughly a 50% payout of adjusted EPS), signals confidence in sustained cash generation.

Booker and Central Europe: useful context

• Booker: core retail like-for-like +2.2% and core catering +3.8% offset a tobacco decline of (9.5)%. Best Food Logistics grew 0.6%. Operating profit rose 0.7% to £292m despite cost inflation.
• Central Europe: like-for-like +2.2% with fresh food +4.1%. Competitive intensity – particularly in Slovakia – drove an impairment and trimmed constant-currency profit, though operational initiatives are making progress.

Strategy, AI and “Save to Invest”

Tesco’s five refreshed ambitions focus on winning in food, serving more everyday needs, deepening supplier partnerships, personalisation and long-term sustainability. Execution is visible: 93 new stores across the Group, 11% UK online growth, and a big push on Clubcard personalisation – including “Your Clubcard Prices” to 1.5m customers.

Importantly, the Save to Invest programme delivered c.£535m this year and £2.2bn over four years, directly funding lower prices and higher colleague pay. A further £500m saving is targeted in FY 26/27. AI is being threaded through the operation – from supply chain risk tools to a new customer assistant rolling out later this year.

Guidance for 2026/27: a wider range, but still cash generative

Given uncertainty linked to the conflict in the Middle East, Tesco offers a wider outlook range: adjusted operating profit of £3.0bn to £3.3bn and free cash flow of £1.5bn to £2.0bn. Capex is expected to be around £1.6bn, focused on technology, warehouse automation and productivity (think electronic shelf-edge labels). The adjusted effective tax rate is guided to around 27%.

Risks and watch-outs

• Competitive intensity remains high, especially in the UK and Slovakia.
• Regulatory and cost pressures persist, including the EPR levy and higher National Insurance contributions.
• Tobacco headwinds continue to weigh on Booker’s reported sales mix.
• Fuel sales declined (6.5)% year-on-year, which damped reported revenue growth.

My take for retail investors

This is a pragmatic, cash-rich delivery. Sales are growing, customers are happier, and market share is moving the right way. Margins are holding up in the face of price investment – that is hard to do in UK food retail – and the free cash flow is robust enough to fund rising capex, a higher dividend and more buybacks.

On the flip side, profit growth is modest, competition is relentless and the outlook range acknowledges macro uncertainty. Net debt is higher, though leverage is still conservative at 2.1x and the pension has swung to surplus, which helps the balance sheet story.

Overall, it is a net positive update: operational momentum, disciplined capital allocation and another £750m buyback to support EPS. If Tesco keeps squeezing out £500m of annual savings while growing online and personalisation, it should stay well-placed for long-term, low-drama compounding.