Tesco has today raised its full-year profit forecast, saying customers were responding to its investments and it was winning market share, giving it momentum ahead of the festive trading period.
Chief executive Ken Murphy said that while UK household budgets remained under pressure and consumers were worried about the prospect of tax rises in the upcoming government budget, he expected robust Christmas trading.
"We are actually betting on a good Christmas, we have a lot of confidence in the strength of our offer," he told reporters after the group reported a 4.9% rise in UK like-for-like sales over its first half to August 23.
He called on finance minister Rachel Reeves to deliver a "pro-growth and pro-jobs" budget on November 26.
Tesco said its sales in Ireland rose by 4.8%
Geoff Byrne, Tesco Ireland CEO, said the grocer had a strong performance in the first half of the year despite the ongoing inflationary environment, with sales growth evident across all its channels.
"To support customers, we have continued to invest in our value proposition, bringing the benefits of an extended range of Aldi Price Match lines along with Clubcard Prices to life in stores and online," Mr Byrne said.
"Food sales have been very strong, with customers recognising the quality of our award-winning ranges which is reflected in improved quality perception year-on-year," he said.
"The addition of three new stores in Dublin (Collins Avenue), Cork (Fermoy), and Cavan (Virginia), along with the expansion of our Online offering through our rapid delivery service Whoosh has helped underpin our business growth," he added.
Shares in Tesco, whose share of Britain's grocery market has grown this year to 28.4%, rose 3%, extending 2025 gains to 20%.
"We're continuing to win with customers and that has driven our strong performance," CEO Ken Murphy said.
Tesco had said in April it expected profit to fall in its 2025/26 year as it set aside cash to deal with a step-up in the "competitive intensity" of the British grocery market - a reference to a pledge of sustained price cuts from Asda, the number three player, which has been losing market share.
Tesco said today that competitive intensity remained elevated.
"However, in the first half, a better-than-expected customer response to our actions and the benefit of an extended period of good weather have helped offset the cost of our investments," it added.
Industry data published last month showed Tesco winning more market share than any other UK grocer.
Ken Murphy said those gains "reflect the decisive action we took at the start of the year to further invest in value, quality and service".
Analysts say Tesco's strategy of matching the prices of discounter Aldi on over 600 items, together with heavy promotion of its Clubcard loyalty scheme, which provides lower prices for members, is driving growth.
Tesco is also becoming increasingly digital, stepping up personalised engagement with customers and developing growth avenues such as its online Marketplace platform and retail media.
Tesco said it now expected full-year 2025/26 adjusted operating profit of between £2.9 billion and £3.1 billion, up from previous guidance of between £2.7 billion and £3 billion and compared to £3.13 billion made in 2024/25.
First-half adjusted operating profit rose 1.5% to £1.67 billion.
"We still think that the H2 profit guidance is conservative, implying more margin pressure in H2 year-on-year than in H1," analysts at Bernstein said in a note.
