Britain's Tesco raises profit outlook floor after first-half rise

Tesco Lifts Profit Forecast and Share Buyback After Half-Year Gains

Half-Year Financial Results and Market Performance

By James Davey

LONDON, Oct 8 (Reuters) - Tesco, Britain's largest food retailer, lifted the bottom end of its full-year profit outlook on Thursday after reporting a 6.5% increase for its first half, even as a very hot summer weighed on sales volumes across the industry.

Financial Highlights

The group, which has a UK grocery market share of 28%, said it made an adjusted operating profit of £1.783 billion ($2.35 billion) for the 26 weeks to August 29, on sales, excluding VAT sales tax and fuel, up 2.0% to £33.8 billion.

Sales Performance

UK like-for-like sales for the half rose 1.5%, having been up 1.8% in the first quarter.

Market Share and Industry Context

Monthly industry data has shown Tesco lost a little market share in the second quarter. However, it was up against a tough comparative performance in the same quarter last year when UK like-for-like sales rose 4.6%, helped by disruption at competitors Marks & Spencer, the Co-op and Asda.

External Factors Impacting Results

The impact on energy prices of the conflict in the Middle East also weighed on many households during the first half.

"While consumer confidence has remained relatively resilient in the first half of the year, ongoing geopolitical tensions continue to create uncertainty," Tesco said.

Profit Forecast and Share Buyback

The group, whose shares have risen 8% so far this year, is now forecasting adjusted operating profit of £3.15 billion to £3.3 billion ($4.16-$4.36 billion) for its year to end-February 2027, versus previous guidance of £3.0 billion to £3.3 billion and £3.152 billion made in 2025/26.

Prior to Thursday's update analysts were on average forecasting £3.249 billion.

Tesco also increased its current year share buyback to £950 million from £750 million, which it said reflected its strong balance sheet.

Industry Developments

Sainsbury's, Britain's second-largest grocer, held talks with smaller rival Morrisons about a merger earlier this year but walked away, according to media reports on Monday.

($1 = 0.7577 pounds)

(Reporting by James Davey; editing by Sarah Young and Paul Sandle)