Tesco is enjoying its highest market share for many years but has lowered its profits guidance amid ‘intense competition’.
The group said it expects group adjusted operating profit of between £2.7bn and £3.0bn against £3.128bn reported for the year to 22 February, which was up 10.9% on the previous year. Group like-for-like sales were up 3.1%.
Market share in the uK grew by 67 bps year-on-year to 28.3%, delivering 21 consecutive four-week periods of market share growth by the end of the year and the firm’s highest market share since 2016 over the Christmas period.
In Ireland it grew market share in 37 consecutive four-week periods, taking its share to 23.9% at the end of the year, up 29bps year-on-year.
The board is proposing a final dividend of 9.45 pence per ordinary share, taking the full year dividend to 13.7 pence, up 13.2% year-on-year.
Ken Murphy, chief executive, said: “Our continued focus on value and quality, coupled with market-leading availability, has contributed to another year of increased customer satisfaction and our highest market share for nearly a decade.
“We have invested in bringing great prices to our customers throughout the year, and continued to innovate with over 1,600 new or improved products including 400 new Finest lines, where overall sales grew 15%.
“We are also making significant progress on our long-term growth opportunities, further enhancing our digital capabilities with increased personalisation, further improvements to our online experience and an expanded retail media offering.
“We continue to invest in our market-leading package of colleague benefits, including over £900m in pay increases across the last three years.
“Building on our strong financial performance, robust balance sheet and positive momentum, we are setting ourselves up for the year ahead with the flexibility to continue to win in a highly competitive market.”
Market reaction
John Moore, senior investment manager at RBC Brewin Dolphin, said: “With the exception of its Booker operation, this is another set of strong results across the board for Tesco.
“Despite moves from some of its peers, Tesco’s market share has reached the highest level since 2016 – buoyed in part by good customer acquisition and retention rates, as measured by app and Clubcard use.
“The UK supermarket sector has long been highly competitive, but there are indications that is intensifying – most notably with Tesco expecting operating profits to be lower next year, well below expectations.
“Nonetheless, a further share buyback and double-digit increase to this year’s dividend suggest management is confident of navigating the challenges that may lie ahead. With a solid balance sheet, clear strategy, and coherent proposition, Tesco is in as good a position as it can be to do so.”
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