Tesco has reported sales growth of 4.6% from 2024/25 to 25/26 – but its chief executive Keith Murphy has warned that the war in the Middle East is creating “uncertainty for consumers” that may affect its performance over the coming year.
The supermarket giant’s preliminary results for 2025/26 show that revenues increased by 5.4%, with an adjusted operating profit of £3.152 million – up 0.8% on last year. The company is outperforming the market with the largest market share of any supermarket in the UK at 28.5%, up +24bps YoY.
Other highlights include the fact that sales using its rapid store-to-door service Tesco Whoosh sales have risen 51% to over £400 million, with the service now rolled out to 31 stores. Tesco opened a further 93 stores, including 65 Express stores in the UK.
AI investment and caution
Looking forward, the company is embarking on a large-scale trial of an AI assistant that will offer inspiration and support with basket-building and meal planning. Initially tested on colleagues, this will be rolled out to customers later in the year.
AI also features prominently in its Save to Invest programme, which is currently targeting £500 million for 2025/26. AI is being deployed across the supply chain and in financing tools to identify risks and opportunities and drive efficiencies, and Tesco has partnered with Mistral AI in establishing an ‘AI lab’ to co-create generative AI solutions.
With political and economic uncertainty ongoing, Murphy said the company is focused on “doing whatever we can to help keep down the cost of the weekly shop”.
Geopolitical risk hits confidence
Analysts are pointing to Tesco’s robust results as evidence that retail growth is possible in the current complex economic environment. “Shoppers remain highly intentional about how and when they spend, with inflation and AI accessibility continuing to shape price sensitivity and purchasing decisions,” said Melissa Minkow, global director of retail strategy & insights at CI&T. “Our data shows that 64% of UK&I consumers plan to pull back on spending to manage rising costs, meaning retailers are having to work harder to win each purchase. Tesco’s focus on price investment and improving the shopping experience is clearly resonating in that context.”
But Minkow warns that cost pressures, uneven demand and external uncertainty make the retail space “a challenging environment.” This is reflected in Tesco’s statement, which says that although the company expects to deliver adjusted operating profit of between £3.0bn and £3.3bn for the 2026/27 financial year, “much will depend upon the duration of the conflict and in particular, the potential implications for UK households and the economy more broadly.”
The results come as the ONS figures for February found that the UK economy grew by 0.5%, showing clear signs of recovery – however, this was before the onset of the Iran war. Economists have now downgraded forecasts for UK growth in 2026 as gas and oil prices soar, and business and consumer confidence declines sharply.
Tesco’s figures underline the resilience of Britain’s largest grocer, with market share gains, fast-growing convenience formats and heavy investment in AI all pointing to a business still firmly on the offensive. But with energy prices rising and consumer confidence faltering in the wake of escalating conflict in the Middle East, the wider economic backdrop is becoming more fragile. As policymakers and economists warn of a slowdown, Tesco may find that protecting value for shoppers — rather than chasing growth — becomes its most important advantage in the year ahead.
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