FY26 guidance looked good to us - clearly expectations weren''t as low as we thought Tesco''s FY25 results came with guidance for FY26 that implied EPS c.-6%/-11%/-15% below Bloomberg consensus at the top/middle/bottom of the range, with the midpoint of the EBIT range 9% below consensus and 9% below FY25 EBIT that came in ahead of expectations. While the guide was actually only 2% lower than the range we wrote about last week, with plenty of reference to firepower and flexibility, the stock was down c.6% on the day, underperforming the Stoxx 600 by 10% (though the performance gap is now back to where it was pre-Liberation Day). New guide embeds material price investment - Asda not the only concern Updating the detailed FY26 profit bridge we published last week, post-company conversations we believe the guide embeds more price investments than we initially thought. With total wages and other opex expenses less of a headwind than we had modelled, our new FY26 operating profit estimate of GBP2.9bn (down GBP100mn) now sees Tesco fully matching Asda''s expected price investments of c.GBP250mn on a proportional basis. However, for us, arguably the bigger threat to numbers from here is a cautious consumer trading down and/or moving back to discounters, helped by a (albeit modest) step up in space growth - as seen in the most recent Kantar print. Risk/reward now more skewed to the upside, re-iterate Outperform rating And so, while our initial assessment of Asda''s price cuts and Tesco''s response leads us to believe there is a very real possibility that we get to the end of the year with Tesco''s share position intact and profits at or above the top end of the range, with material cost pressures and discounter share ticking up on top of Asda''s moves, at this stage we cut our estimates to reflect a material investment. Our updated bear/base/bull scenario now shows outcomes -17%/+18%/+60%. With this compelling risk reward, we maintain our Outperform rating (new TP...