Deutsche Bank is sticking with a Buy rating for Tesco (LSE:TSCO) after the UK grocery giant reported first-quarter like-for-like sales that fell short of expectations across several divisions.
Analyst Benjamin Yokyong-Zoega, who has a 525p price target on the grocer, argues the miss reflected a trough in inflation dynamics rather than a structural deterioration.
Higher supplier costs have yet to feed fully through to shelf pricing, and Tesco may have intentionally priced below the broader market while extending its Aldi Price Match programme during the quarter, the analyst added.
UK like-for-like sales came in at 1.8%, behind Deutsche Bank's 2.2% forecast and consensus of roughly 2.3% to 2.7%, with the two-year stack of 6.9% representing a 130 basis-point sequential slowdown against an 80 basis-point tougher comparative.
Booker wholesale also disappointed at -3.2% versus the bank's -2.5% estimate, while Central Europe at 0.8% trailed the 1.5% forecast, though Ireland at 3.3% edged ahead.
DB noted that Tesco stock trades on approximately 15x calendar 2026 estimated price-to-earnings and a 6.5% free cash flow yield, with the 525p target implying roughly 16% upside to Wednesday's close of 452.40p.
The analyst flagged disinflation, weather and competitor cyber disruption as contributing factors to the quarter's moving parts, and points to Tesco's interim results on 8 October as the next meaningful proof point for the investment case.
