Christmas sales at Tesco and M&S were received differently on the stock market on Thursday – and not as you might have expected, given the news they delivered.
Shares in Tesco dropped 6.7% in trading after its post-Christmas announcement, as group like-for-like sales grew just 2.9%, versus consensus estimates of 3.4% for the 19 weeks to 3 January.
Sales in the six-week Christmas period fell even further below estimates, at 2.4% compared with a 3.4% consensus. Wholesaler Booker was to blame for the drag on performance, with a 2.1% decline in sales in the period. The slump in share price came despite news Tesco had taken its largest market share in a decade and the fact full-year profits will likely come in at the upper end of the £2.9bn-£3.1bn guidance issued in October.
AJ Bell investment director Russ Mould said Tesco’s lower like-for-likes were “not a disaster”.
“A more than doubling in the share price from 2022’s low means the company will be judged more harshly for the slightest misstep,” he added.
Tesco’s strong run in 2025 has given the stock – following 20% gains in the 2025 calendar year – solid ground for further growth, according to RBC analyst Manjari Dhar, though she noted potential headwinds.
“We view Tesco as a best-in-class player, with a strong business model and an experienced management team,” she said.
“The business has executed well, which has led to strong market share gains in recent years. We are mindful that market share gains, whilst still positive, have moderated in recent months and this trend may continue through 2026. We note an ongoing competitive backdrop in UK food retail, with food inflation now coming down.”
M&S’ altogether tougher year – with the Easter cyberattack and resultant £229m hole in H1 profits – cut shares by 12.1% in the calendar year.
But Thursday’s Christmas results nudged the retailer’s share price up 3.6%, as strong food sales (up 6.6%) and record market share of 4% reassured investors of the undiminished appeal of its food offering. With M&S warning of continued short-term disruption from subdued clothing sales – down 2.5% – the stock remains comparatively lowly valued compared with its peers.
“With the consumer still cautious, forecast momentum is likely flat for now, and that implies the shares probably are too. Longer term, we believe there is much to like,” said Peel Hunt analyst Jonathan Pritchard.
Shore Capital’s Clive Black was more effusive, saying if the company hit FY27 expectations it would prove the equity “grossly under-rated and the stock undervalued”.
However, RBC analyst Richard Chamberlain noted the need for M&S to “recover investor confidence in its systems and its ability to execute well over a sustained period”.
“Long term we don’t expect much impact on its strong brand perception, but we do have some concern that M&S is educating its clothing customers to wait for sales.”
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