Tesco PLC

For the 52-week headline basis, group sales grew 4.3% at constant exchange rates and like-for-like sales rose 3.5%. Group adjusted operating profit increased 0.6% at constant rates to GBP 3.15 billion, while headline EPS rose 6% year on year to 29p. Free cash flow was GBP 1.96 billion, up 12% year on year; final dividend was 9.7p, making full-year dividend 14.5p, up 5.8%. Net debt including capitalized leases was GBP 10.56 billion, with net debt-to-EBITDA at 2.1x. For the year ahead, Tesco expects group adjusted operating profit of GBP 3 billion to GBP 3.3 billion and free cash flow within the upgraded medium-term range of GBP 1.5 billion to GBP 2 billion. Capex is expected to be around GBP 1.6 billion, and the company announced a further GBP 750 million share buyback.

Ken Murphy framed the year as proof that Tesco’s strategy of investing in price, quality, service, and data-led digital capabilities is working, citing higher customer satisfaction, market share gains, and strong cash generation. He emphasized that the business is evolving into a food-first ecosystem, with new revenue streams such as retail media, pharmacy, mobile, financial services, Marketplace, and dunnhumby-powered personalization. His tone was confident but measured: core food remains the center, and non-food initiatives are meant to reinforce, not distract from, that core.

Imran Nawaz highlighted that the year beat expectations because investment choices in price, quality, range, and hours delivered better returns than expected, helping drive volume growth and profit growth. He cited GBP 3.15 billion of adjusted operating profit, GBP 1.96 billion of free cash flow versus GBP 1.75 billion last year, GBP 385 million of working capital inflow, and GBP 1.5 billion of cash CapEx. He also noted a strong balance sheet with net debt of GBP 10.6 billion and leverage of 2.1x, a final dividend of 9.7p, and a medium-term free cash flow upgrade to GBP 1.5 billion to GBP 2 billion, while saying the wider near-term profit range reflects conflict-related uncertainty.

Analysts focused on why profit came in ahead of prior expectations, the wider guidance range, cash flow durability, competitive pricing, inflation, and the contribution from newer businesses. Management said outperformance came from better-than-expected returns on investments in price, quality, range, and labor, plus market share gains and the Save to Invest program. On uncertainty, they said the lower end of guidance is about preserving flexibility if Middle East conflict effects last longer, while current trading has not shown a material change in consumer behavior. They also said the non-core businesses are already meaningful contributors overall, but areas like Marketplace are still in investment mode and may not contribute to profits for a few years.