Tesco Shares Leap Over 500p After H1 Results

Tesco shares jumped through 500p on Thursday after the UK's biggest supermarket raised the bottom end of its profit guidance and added £200m to its share buyback.

First-half adjusted operating profit rose 6.3% to £1.78bn as record customer satisfaction scores and strong online growth helped offset cost pressures. The move has lifted the stock out of a range that has held it for most of the year, putting this year's peak near 508p back within reach.

Latest Market Moves

• Tesco shares rose as much as 6.5% to 506.8p on Thursday, from Wednesday's close of 475.8p, making them the top riser in the FTSE 100.

• The jump took Tesco's gain for the year to around 14%, with the stock trading just above 500p in late Thursday morning trade.

• Sainsbury's shares rose around 3% in early trade on positive read-across from the Tesco results.

• The FTSE 100 slipped 0.4% to around 10,413 in early Thursday dealing, weighed down as Brent crude jumped around 4% to above $104 a barrel.

Profit Beat Lifts the Guidance Floor

Tesco now expects full-year adjusted operating profit of £3.15bn to £3.3bn, up from a previous range of £3.0bn to £3.3bn.

Group sales rose 1.6% at constant exchange rates to £33.8bn, with UK like-for-like sales up 1.5% and food up 2.4%. Adjusted earnings per share climbed 12.2% to 17.3p, and the interim dividend rises 5.2% to 5.05p.

The buyback for the current year has been lifted to £950m from £750m, giving the shares a steady buyer in the market. Free cash flow rose 21% to £1.57bn, although around £250m of that is a payroll timing benefit that unwinds in the second half.

Shoppers Stay Resilient but Hunt for Deals

Tesco said consumer confidence had "remained relatively resilient" in the first half, but the way people shop is shifting.

Around 35% to 36% of sales are now made on promotion, roughly three percentage points higher than a year ago, according to finance chief Imran Nawaz. At the same time, the premium Finest range grew 8.9% in the UK, as shoppers hunt for deals on the basics while still treating themselves at home.

Wider data back up the resilience story, with ONS figures showing UK retail sales volumes up 0.5% in August and 2.4% higher than a year earlier. Nawaz was clear that the second half will be a tougher test: "We have got a new budget coming up. We have got Christmas. People's energy bills are going up."

Spending is also moving online, with UK online sales up 8.4% and the Whoosh rapid delivery service growing 37%. Tesco added that the moderation trend among drinkers is likely to curb alcohol sales over Christmas.

Food Inflation Cools, For Now

Cooling food inflation has helped Tesco protect its margins without squeezing its customers.

BRC data showed food inflation slowing to 2.5% in September from 2.8% in August, while Worldpanel put grocery inflation at 2.3% in the four weeks to 6 September. Official ONS figures were softer still, with food and non-alcoholic drink prices up 1.3% year on year in August.

Chief executive Ken Murphy said the industry had managed to "keep a lid on inflation in the first half", helped by competition, falling commodity prices and energy hedging. He also played down the impact of the Middle East conflict, saying "the Middle East doesn't produce a lot of food", although the Food and Drink Federation expects food inflation to climb towards 4% by the end of the year.

Retailers' own costs are still rising, with BRC chief executive Helen Dickinson warning that "there is a limit to what businesses can shoulder". Tesco said its Save to Invest programme, on track for £500m of savings this year, is offsetting operating cost inflation.

Market Share Slips as Lidl Gains Ground

The one soft spot in the numbers is market share.

Tesco's share of the UK grocery market fell 24 basis points to 27.8% in Worldpanel's 12 weeks to 6 September, a fourth straight decline, while Lidl grew sales 8% and Ocado 13.3%. Tesco blamed an exceptionally strong comparison with last year and pointed to a 113 basis point gain over four years.

Murphy said "the market is as competitively intense as ever", but added that it "has behaved pretty rationally over the last number of years".

Tesco Breaks Out of Its Triangle

Thursday's jump has pushed Tesco above the top of a symmetrical triangle that has contained the shares for most of 2026.

The stock has more than doubled since early 2023, climbing from around 220p in a steady run of higher highs and higher lows, with the April 2025 sell-off to near 310p quickly reversed. The rally stalled at around 508p in February, and a falling line of highs and a rising line of lows from the January dip near 410p have squeezed the price into a tightening range since.

A weekly close above the upper trendline, now around 500p, would confirm the breakout and leave February's 508p peak as the next hurdle. Weekly RSI at 61 shows momentum building without looking stretched. A drop back inside the triangle would put the lower trendline near 455p back in focus.

Source: SpreadEx | Tesco, Weekly Chart