Tesco PLC (LSE:TSCO) chose not to raise its full-year profit and cash flow guidance despite delivering a strong Christmas trading period, a decision Shore Capital views as reflecting the retailer’s focus on long-term investment rather than short-term upgrades.
While group sales rose by 3.1% for the 19 weeks to January 4, CEO Ken Murphy emphasised the importance of maintaining value and quality for customers in a challenging consumer environment.
Shore noted that Tesco’s UK operations performed particularly well, with like-for-like sales growing 3.9% over the period and 4.1% during the festive season.
The retailer highlighted market share gains, supported by a 4.7% increase in food sales and a 15.5% rise in its premium Finest range. Non-food sales rose by 4%, while online sales surged by 10.8%, delivering a 122-basis-point gain in digital market share.
In Ireland, Tesco reported like-for-like sales growth of 4.4% over the 19 weeks, nearly 5% during Christmas, with online sales climbing 17%. Shore Capital noted that Tesco’s digital strength and competitive pricing strategy were pivotal in driving these results.
The decision to hold guidance reflects Tesco’s investment in customer experience and market share, according to Shore.
Management retained its targets for retail operating profit at £2.9 billion and free cash flow between £1.4 billion and £1.8 billion.
Shore suggested that while Tesco could have delivered upgrades, its focus on strengthening its long-term proposition positions it well in an uncertain UK consumer market.
The broker maintains a "buy" stance on Tesco stock, citing its robust financial position and compelling long-term investment case.
The shares ended the day 0.5% lower at 368.2p.