Citi has given Tesco PLC (LSE:TSCO) a fresh vote of confidence following the latest round of industry data, arguing that the UK’s biggest grocer is set to keep winning market share even as food prices rise.
The American bank's team points to the latest Kantar figures, which showed grocery inflation picking up to 5.2% in the four weeks to mid-July, up from a 4.2% twelve-week average.
Off the back of these numbers, Citi has nudged up its 2025 food inflation forecast to 4%, saying this backdrop should play to Tesco’s strengths.
According to analysts, every percentage point rise in food inflation typically brings about a 0.5% boost to Tesco’s market share.
The latest data also shows Tesco and Sainsbury’s closing the gap on Aldi and Lidl, with the difference in growth rates narrowing to 97 basis points, the smallest in some time, Citi notes.
This suggests that, for now, shoppers are sticking with the big supermarkets rather than trading down as prices pick up.
Asda, on the other hand, continues to lose ground, with its market share falling further, a trend that Citi thinks will make it tough for Asda to claw back its position in the near future.
The next big moment for investors watching this space will be Asda’s second-quarter update in early August.
Citi’s view is that Tesco’s momentum is holding up well in a shifting market, with supportive market share trends and limited evidence of shoppers trading down, even as inflation remains sticky. That sets a positive tone for the months ahead.
Tesco shares were down 1.3% in afternoon trading at 422.79p.