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Tesco (LSE:TSCO) shares have been already on the march as we entered the New Yr, gaining roughly 48% within the earlier 18 months.
But they’ve saved on going up this 12 months, leaping one other 21.5% to sit down just below a 12-year excessive. This implies anybody who invested £5,000 within the UK’s main grocery store on 1 January would now have nearly £6,100.
On prime of this, Tesco has paid two dividends — in June and November — which might have added nearly £200 to the return. So the full worth could be £6,275 (excluding any buying and selling charges). Stable stuff.
The query now could be, can Tesco do it once more in 2026?
Why has the inventory been rising?
Wanting again throughout the 12 months, one factor that stands out is that Tesco has consolidated its dominant market share. Within the 12 weeks to 1 December 2024, the FTSE 100 grocery store had already achieved its highest market share since December 2017 (at 28.1%).
But the most recent trade information (masking the 12 weeks to 30 November 2025) reveals Tesco’s gross sales rose 4.7%, taking its share to twenty-eight.3%.
Now, a 20 foundation factors acquire won’t sound a lot, but it surely’s fairly spectacular, particularly in an intensely aggressive market just like the UK grocery sector. It implies that any features made by the German discounters (Aldi and Lidl) will not be at Tesco’s expense.
Furthermore, the reductions began by Asda and Morrisons at first of the 12 months haven’t snowballed right into a value warfare. And information reveals that Asda has continued to wrestle, shedding market share to rivals regardless of decrease costs.
To be sincere, this doesn’t shock me. I usually store at Tesco, however once I visited an area Asda café lately, I used to be fairly shocked on the sorry state it was in. I can see why it’s shedding clients, and why Tesco is to this point forward (Asda remains to be the third-biggest grocery store, simply in entrance of Aldi).
In Tesco’s H1 25/26 outcomes (masking the 26 weeks to 23 August), like-for-like gross sales have been up 4.3%, whereas adjusted earnings per share (EPS) rose 6.8% to fifteen.43p. Impressively, the interim dividend was hiked 12.9% to 4.8p per share.
Looking forward to 2026
So, how would possibly Tesco inventory carry out subsequent 12 months? Effectively, I wouldn’t write it off, with CEO Ken Murphy anticipating a robust Christmas interval.
And thru a mix of the Clubcard, the favored Most interesting vary, and a well-oiled supply service, extra market share features might be forward in 2026. That will in all probability increase sentiment for the shares.
That stated, the worth of meals within the UK stays a priority. I do know… I’ve been baulking on the ridiculous value of chocolate lately.
Worldpanel information reveals grocery inflation held regular at 4.7% within the 4 weeks to 30 November. Mix this with rising payments, and buyers are nonetheless below the cosh. So this provides a little bit of threat shifting ahead.
What do Metropolis analysts see for 2026? At the moment, they’ve a median value goal of 476p, which is simply 6.1% above the current stage.
This is smart, with the ahead price-to-earnings ratio at 14.5, which might be close to truthful worth for Tesco inventory.
As such, I don’t see it rising 21% once more subsequent 12 months. And with the forecast dividend yield at a modest 3.5%, I’ve different FTSE 100 shares on my radar proper now.
