Tesco’s share price took a knock on Thursday morning, after UK like-for-like sales slowed to just 1.8% in the first quarter to 30 May 2026.
The City had expected 2.3% growth – and the difference led to a minor retreat from the stock, which fell 2% in morning trading.
Emphasising a rise in customer satisfaction, Tesco played down the deceleration in sales. It cited tough comparables, including last year’s extraordinary run of good weather and disarray among major rivals.
And boss Ken Murphy reiterated guidance for the group to deliver between £3bn and £3.3bn in adjusted operating profit for the year, with free cashflow due to come in according to forecasts at £1.5bn to £2bn.
But the supermarket’s revenue has also been squeezed by disinflation over the past 12 months, with no impact yet felt from the war in Iran.
In part, slowing inflation has been driven by fierce competition among the supermarkets, with the tight market viewed as an opportunity to grab share. Tesco itself has rolled out its Aldi Price Match to 2,000 of its Express stores, but market share gains may be more expensive to come by compared to last year, according to RBC analyst Manjari Dhar.
“Asda has been starting to stabilise its volume losses in the UK, which we think means market share gains might be tougher to come by for Tesco,” she said.
M&S and Co-op have likewise both now recovered from their respective cyberattacks, and while Morrisons had softer comparatives, its 2.2% growth in the quarter was better than Tesco.
Tesco will now have to find like-for-like sales growth of 3.8% for the remaining nine months of the year to match City forecasts of 3.3%.
Yet even for a soft Q1, core ranges performed strongly: fresh food grew 3.6% and Finest grew 9%. Online sales were likewise up 8.9%.
Further revenue growth will come with the approaching wave of inflation from the Iran war, said Bernstein analyst William Woods. Woods added any shareholder gloom over the slow growth was unlikely to last.
“This is a temporary seasonal impact rather than a deterioration in the underlying business performance or competitive position of Tesco within the market,” he said.
AJ Bell investment director Russ Mould added: “While the share price may have endured a slight wobble today, Tesco is still a very well-oiled machine, which should remain resilient.”
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