Sequential LFL slowdown over Xmas disappointed, but volumes still growing Tesco''s 3Q/Xmas trading update was light of expectations, with UK Xmas LFL of +3.2% (vs cons +3.9%) slowing from +3.9% in 3Q (to end Nov, vs cons +4.1%) the main concern for the market. The upgrade to FY26e EBIT guidance to the top end of the range (GBP 2.9bn to 3.1bn) was in line with buyside expectations and Bloomberg consensus. Tesco attributed the LFL slowdown to a softer market, in terms of both inflation and volumes over Xmas, though believe their own proactive price investments led to them inflating below the market and growing volumes and volume share across the period. Today''s -7% stock move should be viewed in the context of being -3% YTD following +20% in 2025 (SXXP +4%) and +27% in 2024 (SXXP +21%). We see UK market growth of 3% in 2025e, with Tesco continuing to take share Looking to FY27, the main investor concern is slowing UK market growth (inflation and volume). On inflation, while there is less industry pressure on the opex side, our forward charts based on early-stage food PPI point to a step up in commodity-led inflation still to come in 2026 (we forecast 3% UK food CPI in 2026 vs 4% in 2025). We tweak down our 2026 UK volume expectations to flat (from +0.2%) on the slower exit rate, but expect Tesco''s front footed price investments, data advantages and the travails at Asda to see it continue to grow volumes ahead of the market. Very small cuts; we forecast 5/10% EBIT/EPS growth in FY27e, TP to 505p, ADR to $20.5 Our FY26-28e EPS estimates fall 0-1% on a lower UK LFL of +3% (from 3.5%) in FY27e. Beyond pre-announced price investments, due to end mid-26 and for which we model a response, we do not see Asda adding material incremental price pressure in FY27e. Despite modelling lower UK volume growth YoY, less price competition and no national insurance increases means we see EBIT/EPS growth of 5%/10% in FY27e, with a 9% EPS CAGR over the next 4 years. We see...