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The Tesco (LSE: TSCO) share worth did it once more in February. It jumped virtually 14.5%, greater than double the return of the FTSE 100, which was additionally fairly splendid at 7%. Tesco shares are actually up 27% over 12 months and 115% over 5 years. Can they keep this momentum?
The grocery large has roared again after dropping its method beneath former CEO Philip Clarke, who stepped down in 2014. Successor Dave Lewis lower prices, bought non-core property, simplified operations and rebuilt buyer belief.
Core FTSE 100 holding
Present CEO Ken Murphy has constructed on that. He’s sharpened Tesco’s worth proposition, invested in own-brand ranges and strengthened its on-line and comfort providing. Some 23m of us now maintain the Clubcard, boosting buyer loyalty and gross sales, and handing it helpful knowledge for personalised advertising and marketing, reductions and tailor-made provides. Tesco is as soon as once more the clear chief in a fiercely aggressive sector.
Its market share now stands at 28.7%, comfortably forward of second-placed Sainsbury’s at 16.2%. Aldi and Lidl are nonetheless menacing, however know their place.
Tesco elevated its market share over Christmas week to 29.4%, its highest in additional than a decade. Contemporary meals did notably effectively, however group gross sales have slowed since, with wholesale enterprise Booker struggling. Tesco now expects 2026 adjusted working revenue to land on the high finish of its £2.9bn-£3.1bn steering vary. In 2025, it was £3.1bn. In order that’s a bit disappointing.
Traders don’t appear to thoughts. They love Tesco proper now. The worth-to-earnings ratio has hit 17.5. That’s not nosebleed territory, however for a grocery store that has to combat tooth and nail to defend wafer-thin margins of round 4%, it’s slightly demanding.
Prices stay a problem. Tesco is the UK’s greatest personal sector employer and should take up larger employer Nationwide Insurance coverage contributions and two sizeable will increase within the Nationwide Dwelling Wage. Easing meals worth inflation ought to assist buyers and margins, however the UK financial system remains to be fragile. Rising unemployment may hit spending energy too.
Worth warfare danger
There are different challenges. The discounters aren’t going away. Worth wars can flare up at any time. Center East worries may drive up oil costs and inflation.
I’ve been dealer forecasts, they usually’re underwhelming. The consensus 12-month worth goal is now 479p, a penny beneath at present’s 480p.
In fact, forecasts ought to all the time be taken with a pinch of salt. No analyst has a crystal ball, nonetheless effectively paid. Additionally, most of these costs can have been set earlier than the February share worth leap. Nevertheless it does replicate my suspicion that after such a robust run, Tesco shares could discover it tougher from right here. The trailing yield has dipped to 2.75%, so there’s much less revenue on supply for brand spanking new traders.
I nonetheless assume Tesco’s value contemplating with a long-term view. It’s a high-quality operator in a dominant place. However the pleasure could fade. Share worth efficiency may be cyclical, particularly within the client sector. Happily, traders can nonetheless discover loads of different FTSE 100 shares on cheaper valuations and, doubtlessly, with stronger dividend and progress prospects too.
