Street Calls of the Week
Investing.com -- Tesco lifted its profit outlook for the year after gaining market share and benefiting from an unusually warm summer, sending its shares up 1.6% in early London trading.
The U.K.’s largest supermarket chain now sees adjusted operating profit for 2025/26 in the range of £2.9 billion to £3.1 billion ($3.9–$4.2 billion). That compares with its prior forecast of £2.7 billion to £3.0 billion and sits above the consensus estimate of £3.0 billion.
Free cash flow guidance was kept at £1.4 billion to £1.8 billion.
Sales momentum remained strong. U.K. like-for-like (LFL) revenue increased 4.9% in the first half (H1), following a 5.1% gain in the first quarter. Group LFL sales excluding fuel rose 4.3%, just short of the 4.6% consensus forecast.
First-half adjusted operating profit climbed 1.5% to £1.67 billion, ahead of the company-compiled estimate of £1.59 billion.
Earnings per share came in at 15.4 pence, topping the 14.4 pence forecast.
“Competitive intensity remains elevated,” Tesco said. “However, in the first half, a better-than-expected customer response to our actions and the benefit of an extended period of good weather have helped offset the cost of our investments.”
Jefferies analyst Frederick Wild said Tesco’s "strong H1 and guidance upgrade caps a remarkable period of market share momentum, inflationary help, and weather-driven consumer spending uplift."
"We expect today’s call to debate the extent to which these trends can continue in H2, vs building investor concern on UK political/macro unknowns," he added.