Tesco PLC (LSE:TSCO) shares climbed 3% to 485.85p after the grocer reported steady growth in sales and profit after a year of investment in lower prices helped lift market share.
Sales excluding fuel rose 4.3% to £66.6 billion, while like-for-like sales increased 3.5% after a strong fourth quarter.
Adjusted operating profit edged up 0.6% at constant currency to £3.15 billion, above its previous guidance of £2.9-3.1 billion, reflecting cost pressures offset by higher volumes and efficiency savings.
Statutory profit before tax rose 8.5% to £2.4 billion on a 53-week basis.
Free cash flow came in at £1.96 billion, up 11.8% and exceeding its guidance for between £1.4 billion and £1.8 billion.
Chief executive Ken Murphy said customers were shopping more with Tesco as the group invested in price and quality, helping it reach its highest market share in more than a decade.
The group also lifted its medium-term cash flow guidance, now targeting £1.5-2.0 billion, up from £1.4-1.8 billion, reflecting confidence in earnings and cash generation.
It said growth will be driven by higher customer satisfaction, stable or rising UK market share, and tighter cost control to offset inflation.
The outlook for the 2027 financial year is for adjusted operating profit of between £3-3.3 billion, which Murphy said was a wider range than had been planned to reflect increased uncertainty caused by the war in the Middle East, and how long the conflict lasts and what effect is had on energy and food costs.
Analysts at Jefferies said the group enjoyed a "strong end to the year", which was "a testament to the extraordinary delivery over the last year".
Profit and earnings were ahead of consensus forecasts, with UK margins better than expected at 4.7%, while profit across its core UK and Ireland business beat estimates.
The broker also highlighted solid fourth-quarter trading, with like-for-like sales in line with expectations but slightly stronger in the UK.
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