BNPP View:
Tesco''s Xmas UK LFL of +3.2% was below our/market expectations and a slowdown vs the +3.9% for 3Q26. While the slowdown is less marked (-40bps) on a 2 year stack, and updated EBIT guidance is towards the top end of their range (where cons is already), given the shares solid start to the year post Tuesday''s Kantar data, we would expect the stock to underperform LSD% today.
While Tesco continues to gain share, clearly executing strongly, we note the Xmas growth rate of +3.2% sits below BBerg cons for FY27e UK LFL of +3.5%, which may lead to some downward tweaks to FY27e estimates, despite what we believe will be an unchanged consensus for the current (FY26e) year.
What happened?
Tesco released their 3Q26 and Christmas trading update with UK LfL in 3Q26 of +3.9%, which was -20bp below consensus of +4.1%. For the Christmas period (6 weeks to 3rd Jan), UK LFL was +3.2%, below consensus of +3.9%. ROI LfL for 3Q26 was +5.0% (vs cons +3.9%) and the Christmas period was +3.8% (vs cons. +3.8%). Booker LFL in 3Q26 came in at -0.9% vs cons +1.2% and over Xmas -2.1%, vs cons +0.8%.
Tesco upgraded its profit guidance, saying it now expects to reach the upper end of the Retail profit of the GBP 2.9-3.1bn range (vs BNPPe GBP 3.2bn, cons. GBP 3.0bn), with Retail FCF guidance unchanged at GBP 1.4-1.8bn (vs BNPP GPB 2.0bn).
Conference call: 9:00 am GMT
