Analysts raise their outlook for the UK's biggest supermarket ahead of full-year results next month.
Tesco PLC (LSE:TSCO), the UK's largest supermarket chain, has had its price target raised to 545p from 515p by analysts, who have also lifted their food inflation forecast to around 4% for 2026, up from a previous estimate of 3%.
The revision, made ahead of the retailer's full-year 2026 results due on 16 April, reflects the ongoing conflict in the Middle East and extreme weather across key food-producing regions in southern Europe, both of which are pushing up the cost of groceries.
As a result, analysts now expect Tesco's UK like-for-like (LFL) sales, a measure that strips out the effect of new store openings, to grow 4.2% in financial year 2027, sharply above the previous estimate of 3.2% and well ahead of the market consensus of 2.6%.
The stronger LFL forecast assumes Tesco will continue to raise prices at a slower rate than the wider market, a strategy known as under-inflating, while still making gains in the volume and mix of goods sold.
Analysts trimmed their fourth-quarter 2026 revenue assumptions slightly, citing continued price investment by Tesco in a competitive grocery market.
A separate concern flagged in the note relates to energy prices, which a commodity pricing model suggests could act as a headwind of up to 1.9 percentage points in 2026, potentially weighing on Tesco's gross margin and sales at Booker, its wholesale and foodservice arm.
Earnings per share estimates were nudged up by 0.2% for 2026 and 1.1% for 2027.