Tesco, Britain’s biggest food retailer, warned on Thursday its profit would likely fall this year, reflecting a further increase in the “competitive intensity” of the UK market.
The group, which has a near 28% share of Britain’s grocery market, said it expected to make group adjusted operating profit of between 2.7 billion and 3.0 billion pounds ($3.47-$3.85 billion) for its year to February 2026, versus the 3.128 billion pounds made in 2024/25.
Prior to the update, analysts had on average been forecasting 3.2 billion pounds.
Tesco said its guidance gave it “flexibility and firepower to be able to respond to current market conditions.”
Asda, Britain’s third largest grocer, said last month it would take a hit to profit to finance a major campaign of price cuts – a move which contributed to Tesco’s shares falling 11% over the last month.
“We are committed to ensuring that customers get the best value in the market by shopping at Tesco and we see further opportunities to protect and strengthen our competitiveness,” the company said.
Analysts doubt Asda’s move will spark a price war.
They say Tesco’s strategy of matching the prices of discounter Aldi on key items, together with its Clubcard loyalty scheme, which provides lower prices for members, is working.
“Asda cannot compete with this and poses limited threat to Tesco,” said analysts at Bernstein.
Tesco is also facing a jump in costs in 2025/26 due to increased social security payments imposed in the Labour government’s first budget last October, a hike in the national minimum wage and a new packaging levy.
The increase in employer national insurance payments will cost Tesco an additional 250 million pounds, while a 5.2% pay rise for store workers will cost 180 million pounds.
Tesco also announced a further share buyback totalling 1.45 billion pounds to be completed by April 2026.
The group’s sales rose 3.5% to 63.6 billion pounds in 2024/25, with like-for-like sales up 3.1%.
(Reporting by James Davey）
