Tesco posts £3.13bn profit and hits decade-high UK share—analysts weigh in on what’s next for investors

How did Tesco perform in FY2024/25 and what drove record market share?

Tesco PLC reported a strong preliminary performance for the fiscal year 2024/25, delivering a £3.13 billion adjusted operating profit and growing its UK grocery market share to 28.3%—its highest level in nearly a decade. The supermarket giant saw group sales rise by 4.0% at constant exchange rates to £63.6 billion, with like-for-like sales up 3.1% and double-digit profit growth year-on-year. This consistent top-line and volume growth was supported by strategic pricing, a robust digital platform, and category innovations aimed at maintaining its leadership position in an increasingly competitive UK retail market.

The results reflect Tesco’s successful execution of its multi-year strategy, which focuses on redefining value for consumers, enhancing digital engagement, expanding omnichannel access, and driving operational efficiencies through its “Save to Invest” programme. With brand perception improving across all key metrics—including value, quality, and reputation—Tesco continues to outpace rivals including Sainsbury’s, Asda, Morrisons, Aldi and Lidl.

What factors strengthened Tesco’s financial and operational momentum?

In fiscal 2024/25, Tesco’s adjusted operating profit rose 10.9% at constant rates, driven by strong sales volumes, retail efficiency initiatives, and a significant contribution from Insurance and Money Services (IMS), which delivered £155 million in operating profit. Group free cash flow came in at £1.75 billion—near the top end of guidance—although slightly below the prior year due to lower working capital gains.

Tesco’s retail profit margin remained solid at 4.5%, up 33bps, demonstrating resilience despite wage inflation and rising energy costs. The company also reduced net debt by £230 million to £9.45 billion and ended the year with a stronger balance sheet, reflected in an improved Net Debt/EBITDA ratio of 2.0x.

In the UK and Republic of Ireland segment alone, adjusted operating profit increased by 10.3% to £3.02 billion, with ROI showing consistent volume-driven sales growth and sustained share gains over 37 consecutive four-week periods. In Central Europe, profits surged by 28.9% to £112 million, fuelled by product mix improvements and category innovations in fresh food and non-food ranges.

How did Tesco’s omnichannel and product strategy drive customer growth?

Tesco’s volume-led approach has paid dividends across physical and digital channels. Like-for-like food sales in the UK rose 4.9%, supported by over 1,600 new or improved products and strong festive season performance. Notably, Tesco’s “Finest” range saw a 15% year-on-year increase, reaching £2.5 billion in annual sales, while Clubcard sales penetration rose to 84% in the UK.

Tesco also invested in store expansion and refurbishment, opening 90 new outlets and refreshing 463 stores across the group. Large store LFL sales rose 4.1%, with customers responding positively to enhanced availability and value-driven promotions. Convenience sales were marginally down, mainly due to declines in tobacco, though Tesco Express gained 138bps of market share, buoyed by new store openings.

Online, Tesco posted 10.2% sales growth, driven by a 10.8% increase in orders per week. Its rapid delivery service, Tesco Whoosh, expanded to over 1,500 locations and now contributes roughly 3ppts to total online sales. The retailer also launched Tesco Marketplace, listing over 400,000 third-party products, and is preparing to bring F&F clothing online in the year ahead.

What role did technology and operational efficiency play?

Tesco’s “Save to Invest” programme delivered approximately £510 million in savings during the year, helping offset operating cost inflation, including the impact of colleague pay rises. Efficiency improvements ranged from robotics at its Peterborough distribution centre to fresh food shelf fixtures designed for faster replenishment. Looking ahead, the company plans to unlock an additional £500 million in savings for FY2025/26, helping to absorb new cost pressures, including a £235 million increase in National Insurance contributions.

Digital innovations have further differentiated Tesco from peers. Clubcard Challenges, personalised pricing, and a revamped app experience led to a 12% increase in app users to 18 million. The company’s retail media arm, the Tesco Media and Insight Platform, ran over 9,000 campaigns in FY2024/25 and was ranked joint #1 in Europe by Flywheel, with brands increasingly relying on Tesco’s omnichannel ecosystem for engagement.

How are analysts rating Tesco shares after its FY2024/25 results?

Market sentiment for Tesco PLC shares is cautiously optimistic. As of mid-April 2025, Tesco shares have risen 8–10% over the past year on the London Stock Exchange, outperforming peers amid high inflation and evolving consumer habits. Analysts have responded positively to the group’s latest earnings and strategic clarity, with a consensus rating skewing toward Buy or Hold.

Key factors influencing investor sentiment include Tesco’s pricing power, 15% EPS growth, and a 13.2% dividend increase to 13.70p per share, which equates to a healthy forward yield of approximately 4.5%. Furthermore, the announcement of a new £1.45 billion share buyback—funded by free cash flow and proceeds from the disposal of Tesco’s banking operations—has reinforced confidence in Tesco’s capital discipline.

That said, Tesco’s cautious guidance for FY2025/26—projecting group adjusted operating profit between £2.7 billion and £3.0 billion—reflects expected challenges from heightened UK market competition and macroeconomic headwinds. These concerns have kept the stock from breaking out further, especially as low-price rivals such as Aldi and Lidl continue to pressure margins.

What’s the investment outlook—Buy, Hold, or Sell?

Buy (long-term positioning): Tesco’s ability to deliver steady income and consistent market share growth makes it an attractive option for income investors and long-term holders. Its digital moat, operational leverage, and customer loyalty initiatives set it apart from traditional grocers.

Hold (short-term caution): Given macro uncertainties and flat profit guidance, investors already holding Tesco shares may opt to stay put. The stock offers a reliable dividend and potential for gradual capital appreciation, supported by digital and retail media tailwinds.

Sell (speculative trades discouraged): Traders seeking short-term momentum may find Tesco’s low volatility and competitive landscape limiting in the immediate term. The constrained upside in FY2025/26 makes speculative entries less compelling for now.

What lies ahead for Tesco in FY2025/26?

Looking forward, Tesco plans to navigate increased market pressure by leveraging its scale, deepening customer engagement through Clubcard personalisation, and extracting efficiencies across operations. The company’s medium-term guidance for free cash flow between £1.4 billion and £1.8 billion reflects its commitment to ongoing reinvestment and shareholder returns.

A continued focus on value-driven promotions, product innovation, and technology-powered operations is expected to underpin Tesco’s resilience in FY2025/26. Meanwhile, retail media, online expansion, and the completion of the £1.45 billion buyback programme will remain key priorities for value creation.

With strong fundamentals and a clear strategy, Tesco remains well-positioned to defend its leadership—even as economic conditions and competitive dynamics shift.