Tesco Earnings: Profitability Outlook Impoves as Inflationary Environment Normalizes

No-moat Tesco reported fiscal half-year 2025 results with top-line results driven by volume growth as the inflationary environment normalized. Retail like-for-like sales were up 2.9%, with UK sales up 4.0%, and Ireland sales up 4.7%. Booker sales were down 1.9%, with the decline in tobacco and Best Food Logistics volumes offsetting strength in catering. From a channel perspective, all formats were up, led by digital growth of 9.3%. Within the UK, market share rose 62 basis points year over year to 27.8% with strong performance particularly from large stores. Ireland saw market share gains as well, increasing 88 basis points year over year to 25.3%. We were also pleased to see Central Europe sales up 0.6%, signaling a gradual improvement in consumer sentiment.