-- Tesco (TSCO.L) delivered earnings growth in fiscal 2026, but cautioned for the year ahead amid heightened geopolitical risks in the Middle East, according to a Thursday earnings release.
After posting 3.15 billion pounds sterling in adjusted operating profit for the 52 weeks ended Feb. 22, the grocery chain operator widened its guidance range to 3 billion pounds sterling to 3.3 billion pounds for fiscal 2027 to account for the economic uncertainty caused by the Iran war. It also aims to save an additional 500 million pounds through its Save to Invest program, supporting ongoing investment in the customer experience.
Bernstein noted this guidance update as the "only note of caution" amid a "strong set of results" from Tesco. "The lower end of this guide has the risk of spooking the market and the mid-point of GBP3.15bn is below consensus of GBP3.2bn - we think that this is careful and conservative guidance in the face of the Middle East war and to avoid accusations of profiteering. We think with higher food inflation and higher fuel prices, they should be able to reach at least the upper end of this range. [Capital expenditure] is expected to be GBP1.6bn (vs. GBP1.5bn last year). A share buyback of GBP750m is confirmed for the next FY. They have updated their mid-term [free cash flow] target from GBP1.4-1.8bn to GBP1.5-2bn, which will be well received," the research firm wrote in a quick-take note.
Tesco's attributable profit jumped to 1.79 billion pounds for the 53 weeks ended Feb. 28, 2026, against the 1.63 billion pounds for the 52 weeks ended Feb. 22, 2025. Revenue from the sale of goods and services also climbed to 73.71 billion pounds from 69.92 billion pounds, as like-for-like sales increased by 3.5% year over year.
The retailer reported a 4.3% increase in sales at constant currency for the 52 weeks to 66.59 billion pounds, with growth observed across its operating segments. Group volumes "continued to grow" amid sustained investment in customer offerings to counter intensifying competition in the UK, Tesco added. By region, the UK and Ireland led with total sales growth of 5% at constant rates, followed by Central Europe at 3.7% and then Booker at 0.6%.
"We are committed to doing whatever we can to help keep down the cost of the weekly shop, and with the conflict in the Middle East creating further uncertainty for consumers and the economy more broadly, that commitment matters more than ever. Over the last year, despite cost pressures from new regulation, we have increased our investments in keeping prices low, further improving quality and offering even better service. Customers are choosing to shop more with us as a result, leading to our highest market share for over a decade," Chief Executive Ken Murphy said.
Within this context, Tesco's board proposed a final dividend of 0.097 pound per share, up from the 0.0945 pound per share paid a year ago. The planned payout increases full-year dividend by 5.8% to 0.145 pound per share, consistent with the company's dividend policy of targeting a distribution of 50% of adjusted EPS.
The London-listed stock was up 2% by midday on Thursday.