Tesco results: profit up 6% and the full-year forecast raised

Tesco results for the first half showed profit growing much faster than sales, and the grocer raised its profit forecast for the year. Adjusted operating profit rose 6.3% at constant exchange rates, to £1,783m, in the 26 weeks to 29 August, Tesco reported on Thursday. Sales, leaving out VAT and fuel, rose 1.6% on the same basis, to £33.8bn.

Tesco now expects adjusted operating profit of £3.15bn to £3.30bn for the year to February 2027. In April it had said £3.0bn to £3.3bn, so the bottom of the range has moved up. It also raised this year’s share buyback to £950m, from £750m, and lifted the interim dividend by 5.2% to 5.05p a share.

Profit grew faster than sales

The gap between profit growth and sales growth is the story of the half. Like-for-like sales, from stores open for at least a year plus online, rose 1.0% across the group. Adjusted operating profit rose 6.3%.

For the UK and Ireland, Tesco gives three reasons. It sold more of its dearer lines: sales of its Finest range rose 8.9% in the UK. It cut costs, saving £251m in the half under its “Save to Invest” programme, which aims for £500m this year. And newer businesses grew: Tesco Media, its advertising arm, and Whoosh, its rapid delivery service, whose sales rose 37% in the half.

Profit in the UK and Ireland, by far the largest part, rose 6.0% to £1,557m. Central Europe rose 38.4% to £63m. Booker, the wholesale business, was flat at £163m, as its sales fell.

Tesco like-for-like sales, first half 2026/27, change on a year earlier

Tesco like-for-like sales, first half 2026/27, change on a year earlier. Source: Tesco PLC, Interim Results 2026/27, 8 October 2026. Like-for-like: stores open at least a year, plus online, excluding VAT and fuel.

Ireland	+4.1%
UK	+1.5%
Central Europe	+0.4%
Booker	−2.6%
Group	+1%

Source: Tesco PLC, Interim Results 2026/27, 8 October 2026. Like-for-like: stores open at least a year, plus online, excluding VAT and fuel.The Macro Notebook

How the UK shopper is doing

UK like-for-like sales rose 1.5%, and food 2.4%. That is only a little ahead of food prices. Food inflation fell from 3.7% in March to 1.3% in August, according to the Office for National Statistics, and averaged about 2.2% over the six months, by our calculation. That suggests most of Tesco’s food growth came from prices rather than from people buying more.

Tesco lost a little ground. Its UK market share was 27.8% on Worldpanel’s measure, 0.24 points lower than a year earlier, which Tesco puts down to a very strong first half last year. A four-week Nielsen measure that includes rapid delivery showed a small gain. Online grew faster: UK online sales rose 8.4%.

Fuel was the odd one out. Fuel sales rose 19.7% at constant rates, to £3.6bn, “primarily from higher oil prices increasing retail fuel prices”, the company said. Tesco leaves fuel out of its main sales measure.

The outlook is careful about the second half. “Consumer confidence has remained relatively resilient,” it says, but “ongoing geopolitical tensions continue to create uncertainty”.

Cash and the buyback

Free cash flow rose 21% to £1,570m. About £250m of that came from the timing of the payroll cycle, and it will reverse in the second half. Tesco still expects free cash flow of £1.5bn to £2.0bn for the year.

Net debt was £10.0bn, or 2.0 times EBITDA, a measure of operating cash profit, below the range of about 2.3 to 2.8 times that Tesco aims for. The balance sheet and the strong cash flow, Tesco says, support the larger buyback. Tesco had bought back £550m of shares by 7 October, and £4.8bn since October 2021.

Adjusted earnings per share rose 12.2% to 17.3p, almost twice as fast as profit, because buybacks have cut the number of shares. Tesco also raised its capital spending plan for the year to about £1.7bn, from about £1.6bn, for technology.

What to watch next

The next UK inflation figures, for September, come out on 21 October. Food prices matter for Tesco in both directions: higher inflation lifts sales in pounds but squeezes shoppers. Tesco’s Christmas trading statement is due in January.

The results show a grocer making more from each pound it sells, through cost cuts, its own premium brands and advertising. The open question is the second half, which Tesco itself calls uncertain. It raised the bottom of its profit range but kept the top at £3.3bn.