Tesco has significantly enhanced its presence in the grocery and general merchandise retail market during the first half of fiscal 2025, yielding impressive results that include an increased dividend and more optimistic forecasts. With a strong improvement in volume, Tesco has captured 27.8% of the overall market, marking its highest market share since January 2022.
The retail giant credits its commitment to value, quality, and service as key components driving the notable 62-basis-point annual increase in market share and growth that surpasses market expectations. In a strategic move, Tesco has lowered prices on over 2,850 products by an average of 9% across the UK.
Additionally, the retailer has either launched or improved more than 860 products and has opened 44 new stores while refurbishing 182 existing locations. Consequently, Tesco's revenue surged to £34.77 billion for the 26-week period ending August 24, 2024, up from £33.80 billion during the previous year.
The company's profit attributable to its owners also saw an uptick, rising to £1.05 billion from £927 million, bolstered by robust volume growth across its retail sectors and a one-time £42 million gain from its retained banking operations. Emphasizing confidence in its financial performance, Tesco, as the largest grocer in Britain, announced an interim dividend of £0.0425 per share, surpassing the payment of £0.0385 per share from the prior year.
Furthermore, the company raised its retail adjusted operating profit forecast for fiscal 2025 to £2.9 billion, up from at least £2.8 billion. This guidance is a testament to Tesco's reputation as a 'strong and stable performer, delivering margin improvements and generating strong free cash flow,' as noted by Bernstein. Tesco has maintained its full-year capital expenditure forecast at £1.4 billion, following a spending of £530 million in the first half of the fiscal year.
In a disciplined financial strategy, the company saved £260 million, aiming to reach a total of £500 million in savings. Tesco is also preparing to initiate a share buyback program to return the majority of funds from the impending sale of its banking sector—which encompasses credit cards, loans, and savings—to Barclays, a deal expected to close before the end of the calendar year.
Additionally, Tesco is set to inaugurate a new chilled distribution center in Aylesford, UK, by the summer of 2025. Chief Executive Officer Ken Murphy expressed, 'Our strong momentum allows us to continue to focus on value, quality, innovation, and the broader customer experience, while investing in growth opportunities in a disciplined, returns-focused way.' In early morning trading, Tesco's stock improved by 2%..