Tesco interim results 2025/26: market share up, guidance raised, cash still flowing
Tesco has delivered a solid first half, leaning into value, quality and service to win customers in a highly competitive UK grocery market. The headline: like-for-like sales grew, adjusted profits edged up, cash generation stayed healthy, and management raised full‑year guidance.
If you’re new to the jargon: like-for-like (LFL) compares sales in stores open at least a year (and online), and “adjusted” strips out one‑off items to show underlying trading performance.
Key numbers at a glance
| Group sales (ex. VAT, ex. fuel) | £33,051m (+5.1%) |
| Group adjusted operating profit | £1,674m (+1.6% at constant rates) |
| Adjusted diluted EPS | 15.43p (+6.8%) |
| Free cash flow | £1,298m (+2.9%) |
| Net debt | £9,884m (2.0x net debt/EBITDA) |
| Interim dividend per share | 4.80p (+12.9%) |
| UK market share | 28.4% (+77 bps YoY) |
| UK online sales | +11.4% (online share 36.9%) |
| FY25/26 adjusted op. profit guidance | £2.9bn-£3.1bn (raised) |
Strong trading across the board, with the UK in the driving seat
Group LFL sales rose 4.3%, with the UK up 4.9%, Republic of Ireland up 4.8%, Central Europe up 3.4% and Booker up 1.7%. That breadth matters: it says the offer is resonating beyond one market or channel.
Adjusted operating profit ticked up 1.6% at constant rates to £1,674m. Margins slipped 10 bps to 4.6% as Tesco kept investing in price, quality and service while absorbing cost inflation, including higher National Insurance and the new Extended Producer Responsibility (EPR) packaging levy.
- UK & ROI adjusted operating profit: £1,468m (+2.1%).
- Booker adjusted operating profit: £162m (+0.6%).
- Central Europe adjusted operating profit: £44m (-11.2%), reflecting price investment, tougher competition and lower mall income post disposals.
Statutory profit measures were softer (operating profit -0.6%, profit before tax -6.3%) due to restructuring, separation costs from the Bank disposal, and fair value movements on financial instruments. That’s accounting noise rather than a deterioration in the day job.
Market share gains and happier customers: why this matters
Tesco’s UK market share climbed 77 bps to 28.4%, with 28 consecutive four‑week periods of gains. Brand perception improved across satisfaction (+263 bps), value (+89 bps) and quality (+13 bps). In plain English: shoppers like the experience, think it’s good value, and are telling their mates.
Price remains the battleground. Over 6,500 product prices were cut year-on-year at an average reduction of around 9%, supported by Aldi Price Match, Low Everyday Prices and c.10,000 weekly Clubcard Prices. Tesco’s “Save to Invest” programme – targeting c.£500m of savings this year – is funding a lot of this without blowing up the P&L.
Online, Whoosh and media: scaling higher-margin ecosystems
UK online sales grew 11.4%, driven by a 12.1% rise in weekly orders, more delivery slots and better substitution algorithms. Delivery Saver subscribers rose 9.3% to 788,000. Whoosh rapid delivery was up 59% and now covers over 70% of UK households.
F&F online has launched, extending clothing reach, while the Tesco Media and Insight Platform continues to add advertisers and formats (including video ads in the app). This digital ecosystem deepens loyalty and monetises audience attention – a structural positive.
Cash generation, capex and the balance sheet
Free cash flow came in at £1,298m, helped by a £408m working capital inflow and continued capital discipline. Net debt is £9,884m; the net debt/EBITDA ratio remains steady at 2.0x, below Tesco’s target range of 2.8 to 2.3 times, with £3.4bn of liquidity plus a £2.5bn undrawn RCF.
Capex rose to £667m (+25.8%) as Tesco invests in distribution automation and digital platforms. The new semi‑automated Aylesford fresh distribution centre is open, and a major new DC at DP World London Gateway is planned for 2029. In-store improvements continue, with 38 openings and 112 store refreshes in the half.
Capital returns: bigger buyback, bigger dividend
Tesco has bought back £891m of shares since April as part of the £1.45bn programme due to complete by April 2026. In total since October 2021, £3.7bn has been returned via buybacks. Adjusted diluted EPS rose 6.8% to 15.43p, helped by both profit growth and a lower share count. The interim dividend is 4.80p, up 12.9%, in line with the policy of paying 35% of the prior full‑year dividend.
Guidance raised: the key takeaway for investors
Management now expects FY25/26 Group adjusted operating profit of £2.9bn-£3.1bn, up from £2.7bn-£3.0bn. Free cash flow is still guided within the medium‑term range of £1.4bn-£1.8bn. Note the year is 53 weeks, but guidance is on a 52‑week basis for comparability.
That uplift reflects better‑than‑expected customer response and a warm summer, which offset the cost of investments. It’s a clean signal of confidence in the strategy and execution.
What I like vs what to watch
Positives
- Consistent market share gains in the UK and ROI, supported by improved value and quality scores.
- Online momentum and Whoosh expansion, with the Clubcard and retail media flywheel spinning faster.
- Robust free cash flow and a disciplined balance sheet, enabling ongoing buybacks and a higher dividend.
- Raised profit guidance – the headline investors wanted.
Watch-fors
- Competitive intensity “remains elevated” – the price war is not over.
- Margins dipped 10 bps to 4.6% as Tesco invests to defend share; further investment could cap near-term margin upside.
- Central Europe profits fell 11.2% on competition and regulatory pressure; recovery may take time.
- Booker faces ongoing tobacco market decline, partly offset by strong core retail and catering.
- Net finance costs rose with unfavourable fair value remeasurements – non‑cash, but a swing factor in statutory results.
My take: steady execution, customer-first strategy is working
This is a well-controlled set of results. Tesco is doing the hard, unglamorous work – cutting costs to reinvest in price and experience – and it’s showing up in share gains, happier customers and resilient cash. The digital ecosystem (Clubcard, online, Whoosh, media) adds a structural growth layer that should compound over time.
Yes, statutory lines are noisy and Central Europe is under pressure, but the raised guidance, strong free cash flow and ongoing capital returns tell you where management’s confidence sits. In a tough market, Tesco looks like it’s playing offence.
Key segment LFL growth (H1 25/26)
- UK: +4.9%
- ROI: +4.8%
- Booker: +1.7%
- Central Europe: +3.4%
Important to note: FY25/26 is a 53‑week year; Tesco will also report key metrics on a 52‑week basis. All guidance in this update is on a 52‑week basis.
