Shore Capital, the highly-regarded retail sector specialist, has reiterated its buy recommendation on Tesco PLC (LSE:TSCO) ahead of the supermarket group's full-year results on 16 April, arguing that the grocer's qualities as a reliable cash generator justify further gradual re-rating of its shares.
Analysts Clive Black and Darren Shirley said Tesco had navigated a more intensely competitive UK grocery market with commendable discipline during its financial year to February 2026.
They noted the retailer had held and extended its market share of around 28% in the face of elevated pricing pressure from rivals, including Asda.
Shore left its financial forecasts unchanged, having nudged them up on Tesco's New Year trading statement, and forecasts adjusted earnings per share of 28.4p for the year just ended, rising to 31.0p in the following year as the business returns to stronger profit growth.
The note highlights Tesco's expanding portfolio of growth income streams beyond its core supermarket chain, pointing to continued investment in convenience, its Whoosh rapid delivery service, Clubcard data and digital media revenues, its online marketplace and its Booker wholesale arm as avenues for mid-single digit medium-term trading profit growth.
Shore also flagged particularly tough weather-affected first-half comparatives going into the new financial year, which it said could influence the shape of year-on-year performance in 2027.
On capital allocation, the analysts expressed confidence in the sustainability of Tesco's ordinary dividend, which they forecast will rise to 14.5p per share for the year just ended and 15.8p the following year, alongside ongoing share buybacks, with the company forecast to spend £1.45 billion cancelling shares in the current year.
Shore argued that even after a significant re-rating, Tesco's equity still has further to travel, trading at around 16.7 times forecast earnings for the year just ended, with scope to compress further as the group's cash-generative credentials and consistent capital discipline become more firmly established in investor minds.