Core Viewpoint - Tesco's interim results showed a positive surprise primarily on the bottom line, but the share price appears to have peaked with limited upside potential at this time [2][3]. Financial Performance - Group revenue increased by 3.6% to £36.04 billion, driven by UK and ROI sales growth of 5.6% to £24.67 billion and 6.4% to £1.54 billion, respectively [3]. - Gross margin improved by 6 basis points to 7.88%, although EBIT margin declined by 9 basis points to 4.65% due to higher labor costs [4]. - Pre-tax profits rose by 2.3% to £1.41 billion, with attributable profit increasing by 2.1% to £1.03 billion, and EPS grew by 6.8% to 15.43p due to share buybacks [5]. Guidance and Market Outlook - Management upgraded its guidance for the year from £2.7-3.0 billion to £2.9-3.1 billion, reflecting stronger-than-expected performance [6]. - The outlook remains contingent on market competition, with expectations of less favorable gross margin growth in H2 due to various external factors [7][8]. - Forecasts for FY26 through FY28 have been slightly reduced due to anticipated slower market share gains and a competitive environment in ROI [9]. Future Projections - Despite the reduction in revenue forecasts, bottom line EPS upgrades are expected due to a favorable margin mix and efficiencies from AI and digital initiatives [9]. - EBIT is projected to be slightly above guidance at £3.13 billion, with EPS CAGR estimated at 11.2% [10]. - The current PEG ratio of 1.4 suggests limited upside for Tesco's share price, maintaining a price target of 450p [10].

Core Viewpoint - Tesco's share price has reached new decade highs multiple times this year, with expectations for strong interim results upcoming [3] Financial Performance - Management has provided a conservative adjusted EBIT guidance range of £2.7-3.0 billion, down from £3.13 billion in FY25 [5] - Market forecasts suggest an upgrade of at least £100 million to the lower bound of guidance [5] - Tesco's UK revenue is anticipated to grow by 6.1% to £24.79 billion, with Irish revenue expected to rise by 7.2% to £1.55 billion, and Central European revenue by 4.7% to £2.12 billion [9] - Booker is projected to see modest growth of 2.9% to £4.76 billion, while fuel sales are expected to decrease by 10.0% to £2.98 billion [10] Market Position and Competition - Tesco has expanded its market share by 0.7% to a record 28.4%, despite concerns over competition from ASDA [8] - ASDA has experienced 18 consecutive months of negative sales, indicating that the competitive threat has not materialized as feared [6][7] Future Outlook - The upcoming report must meet or exceed consensus expectations to support further share price increases [11] - A narrower guidance range above £2.80 billion could also positively impact the share price [11] - Uncertainties regarding the Budget and potential tax hikes may limit optimistic near-term outlooks [12] - Evidence of easing commodity inflation and resilient consumer behavior towards higher-margin products will be crucial for investor sentiment [12] Valuation Considerations - The upside for Tesco's share price may be limited from a valuation perspective, as much of the future growth is already priced in [13] - Further evidence of strong market share growth and margin expansion will be necessary to justify an upgraded price target [13]