Tesco (LSE:TSCO) maintained its full-year guidance for adjusted operating profit of between £3bn and £3.3bn after posting first-quarter like-for-like sales growth across its UK, Republic of Ireland and Central European operations, with free cash flow also expected within its medium-term range of £1.5bn to £2bn.
In London, Tesco shares traded lower, losing around 10.9p or 2.4% to 445.9p in Thursday's early trade, whilst market pundits described it as a "resilient but softened" quarter.
Richard Hunter, market analyst at interactive investor, said Tesco is well placed whilst noting that geopolitical headwinds (ie inflation, including rising fuel and logistics costs) had clipped the grocer's headline figures.
UK & Ireland sales increased
UK food sales rose 2.6% on a like-for-like basis, with fresh food up 3.6% and the premium Finest range growing total sales 9%, or 29% on a two-year basis, while online sales climbed 8.9% following Whoosh same-day delivery expansion into a further 34 large stores.
The wholesale and foodservice arm Booker was the softer spot: core retail sales fell 1.5%, including roughly 200 basis points of drag from the exit of a lower-margin national account in August 2025, and core catering declined 3.3%, partly against a prior-year period that benefited from favourable weather and a later Easter; the two-year like-for-like figures of 3.2% and 2.9% respectively show the underlying trend in a better light.
Republic of Ireland delivered like-for-like growth of 3.3% with online up 10.9%, while Central Europe grew 0.8% on a like-for-like basis, with online up 17.4%.
"With the conflict in the Middle East creating ongoing uncertainty for many households, we remain focused on giving customers the very best combination of price, quality and service," said chief executive Ken Murphy.
Tesco met lowered expectations
Reacting to the trading update, interactive investor analyst Richard Hunter said group revenues had broadly met lowered expectations.
Booker was the clearest drag, he noted, with like-for-like sales falling 3.2% following a contract loss, and tobacco revenues down 9.7% year-on-year and 17.2% over two years, but, the analyst added that the wholesaler still accounted for 13% of group sales.
Hunter also pointed to the "Save to Invest" programme as a support. It delivered more than £2.2 billion in cost savings over four years, of which approximately £535 million came last year, enabling Tesco to absorb cost inflation and sustain competitive pricing through initiatives including its Aldi Price Match and Clubcard Prices.
Hunter claimed if inflationary effects emanating from the US-Iran conflict intensify, Tesco's scale and cost discipline give it structural advantages its rivals will struggle to match, leaving "the ongoing battle still for Tesco to lose rather than its rivals to win."
Tesco will report interim results on 8 October.
