Following today’s release of Tesco’s figures for the 26 weeks ending 29 August 2026; Eleanor Simpson-Gould, senior retail analyst at GlobalData, a leading intelligence and productivity platform, offers her view: “Tesco has delivered a mixed set of results; its profits are rising, but customers are holding back on spending. As the UK’s largest grocer, Tesco is a bellwether for the wider market, and H1 group sales growth slowing to 2.0% from 5.1% last year points to a broader drag on spending. This slower growth leaves little room once price inflation is accounted for, raising the prospect of volume declines across the market. UK like-for-like (l-f-l) sales decelerated through the half from 1.8% in Q1 to 1.3% in Q2. With Q2 including successive heatwaves and the World Cup, this should have lifted spending on drinks, barbecue food and at-home gatherings, yet the heat also worked against Tesco. Refrigeration failures at several stores during the summer heatwaves left chilled and frozen shelves empty and disrupted some home deliveries, which will have supressed sales.
“Profit performance however was strong, with Group adjusted operating profit up 6.5% to £1.8bn, as Tesco earned more from each shop through Finest trade-up, cost savings and newer income streams such as Tesco Media and Whoosh. On the back of this, Tesco has cautiously raised the lower end of its full-year profit guidance to £3.15bn, while keeping the upper end at £3.30bn. This signals confidence in the profit growth already secured, but limited visibility on demand and competition for the rest of the financial year.
“Premium own brand is increasingly propelling Tesco’s food growth. Food l-f-l sales rose 2.4%, while Finest sales grew 8.9%, demonstrating the grocer’s continued momentum in trading customers up even when spending is cautious. The supermarket retailer pushed hard on innovation during the half with 800+ new and improved products, including fibre-enriched bakery and high-protein ready meals. However, it must balance the volume of launches against the need to retain quality and convert impulse buys into repeat purchases. Tesco is leaning on Clubcard and AI to do this. Freebie Thursdays is a pragmatic sampling mechanism, but the AI meal-planning assistant, which it has now begun rolling out to customers, has greater strategic potential. It can build new lines and Finest products into planned weekly baskets, rather than relying on shoppers to discover them in the aisle. As we enter the festive season, Tesco should lead with fewer but higher-impact Finest launches, use Clubcard Prices to lower the barrier to trying them, and use the meal-planning assistant to build Finest products into customers’ Christmas menus.
“Non-food remains a drag on Tesco’s overall performance, with Home and Clothing l-f-l sales down 0.6%. TVs and collectables benefited from demand during the World Cup, but homewares categories were significantly weaker. Clothing is improving with less reliance on markdowns and better full-price performance. Towards the end of H1, Tesco launched its new F&F website and its improved discovery tools, such as “Shop the Look” and product videos, which could help lift clothing sales in H2 to offset weak home sales. Christmas is the immediate opportunity. Tesco must give gifting, partywear, and home textiles for festive hosting more prominence in large stores and on the F&F website. Tesco should also use Clubcard data to direct F&F offers to grocery shoppers who do not yet buy clothing or home products from Tesco, turning its food traffic into non-food sales.”
