While most UK workers put their monthly salary into a savings account, those who used it to invest in Tesco (LSE:TSCO) shares a year ago made a far more rewarding decision.
The stock’s delivered a total return of 35.69% over the past 12 months, turning the average UK monthly take-home pay of £2,934 into around £3,981 in just one year.
The question now becomes, will Tesco shares do it again?
A stellar performance
Tesco’s rally isn’t luck. It’s the product of genuine operational progress while successfully communicating stronger value perception among British consumers.
After years of headwinds, including brutal discounter competition and margin pressure, Tesco’s found genuine momentum.
Management’s October 2025 upgrade to its full-year underlying operating profit guidance of £2.9bn-£3.1bn not only beat analyst expectations but also served as a powerful signal that Tesco had found its stride in the midst of a cost-of-living crisis.
When the results came out last month, management both delivered on its performance promises while simultaneously growing the supermarket’s market share to its highest level in over a decade. That’s despite the continued pressure from discount retailers, revealing the power of Tesco’s Clubcard loyalty scheme.
The timing of this progress also proved to be quite fortunate. With investors and fund managers alike rebalancing their portfolios into more defensive sectors on the back of rising geopolitical uncertainty, Tesco’s strong financial performance has made it a popular favourite in 2026 so far.
So with that in mind, it’s no wonder Tesco shares are on a bull run. But can it continue?
What happens now?
The economic landscape in 2026 is a tricky one. Rising labour costs and Employers’ National Insurance contributions are driving up costs for supermarkets across the country.
At the same time, fertiliser supply chain disruptions in the Middle East is expected to significantly drive up food costs later this year, putting even more pressure on British consumers. This nasty combination of rising expenses and limited ability to pass on costs to customers means Tesco’s margins are likely to get squeezed.
In response to this shifting landscape, management has committed to achieving £500m in annualised savings, in an attempt to offset this pressure through superior efficiency.
Whether or not this strategy will prove successful remains to be seen. But the group’s recent track record does show a pattern of robust execution from leadership. And that’s why the analyst team at UBS has recently reiterated its Buy recommendation with a share price target of 545p.
Compared to where Tesco shares trade today, that implies a potential 12% return over the next 12 months – enough to turn £2,934 into £3,297.
Is Tesco a good investment?
The pressure is definitely mounting for British supermarkets, especially since the already optimised operations of discount retailers like Aldi and Lidl put them in a far stronger starting position to navigate the incoming headwinds.
Nevertheless, Tesco does have some proven defensive traits that make it a potentially compelling stock pick for investors seeking shelter from market volatility. That’s why I think it definitely deserves a closer look.
