Tesco (LSE:TSCO) shares are up 4% over the past six months. That isn’t an amazing return but it would turn £10,000 into £10,400. What’s more, there’s the dividend to account for. Assuming half of 3.5% the annualised dividend yield would be paid during the period (this isn’t exactly how it works but it makes it easier from a calculation perspective) an investor would have received an extra £175.
However, this 4% rise belies a lot of the volatility we’ve seen in recent months. Tesco shares remained fairly flat with the exception of a considerable dip in April as Donald Trump’s trade policy shocked markets. However, with the market largely believing the worst of the tariff disruption is behind us, investors have flocked back into stocks, including Tesco.
More positive signs
Tesco delivered more stellar results on 12 June, reporting group like-for-like sales up 4.6% to £16.38bn for the first quarter, as it continued to grow market share in a fiercely competitive environment.
UK like-for-like sales rose 5.1% to £12.3bn, with Ireland up 5.5% and Central Europe up 4.1%. Tesco’s UK market share climbed 44 basis points year-on-year to 28%, marking 24 consecutive four-week periods of gains.
Food sales jumped 5.9%, driven by strong fresh food demand, while non-food sales grew 6.2% on the back of a robust home and clothing performance.
Meanwhile, online sales surged 11.5%, with market share up 163 basis points. CEO Ken Murphy said Tesco’s focus on value, quality, and service continues to resonate with customers, underpinning broad-based growth.
Beating its peers
This is all really positive for Tesco, especially given the fierce price competition playing out across the UK grocery sector. Asda, in particular, has been working aggressively to reclaim lost ground, rolling out its biggest round of price cuts in a quarter of a century and relaunching its Rollback campaign.
Despite these efforts, Tesco’s managed to hold its own. Recent industry data shows that while Asda remains the cheapest traditional supermarket for larger baskets, Tesco with Clubcard pricing is often only a few pounds more expensive and, in some months, even outperforms Asda on certain items.
Despite the competition, Tesco’s scale, loyalty scheme, and ability to deliver value across food and non-food categories have allowed it to maintain momentum. This ability to thrive even as rivals double down on price cuts underlines the strength of Tesco’s brand, operational efficiency, and customer proposition in an intensely competitive landscape.
The bottom line
GDP data came in weak on 12 June. And while this may represent some economic anomalies, it’s also true that government policy’s likely to weigh on the economy in the short term. If we start to feel poorer, then grocers might experience some pain. This is a risk investors should bear in mind.
Personally, I like Tesco. It’s not the type of stock I’d normally go for, but it’s certainly worth considering even at 16 times forward earnings. It just keeps going from strength to strength.
