Preliminary Results 2025/26

The full release of Tesco PLC's Preliminary Results 2025/26 is available at http://www.rns-pdf.londonstockexchange.com/rns/6553A_1-2026-4-15.pdf and on the Tesco PLC corporate website tescoplc.com. Tesco PLC's preliminary results for the 53 weeks ended 28 February 2026 have been submitted in full unedited text to the Financial Conduct Authority's National Storage Mechanism and will be available shortly for inspection at https://data.fca.org.uk/#/nsm/nationalstoragemechanism

PUTTING CUSTOMERS FIRST, WELL-PLACED FOR LONG-TERM GROWTH

Ken Murphy, Chief Executive:

"We are committed to doing whatever we can to help keep down the cost of the weekly shop, and with the conflict in the Middle East creating further uncertainty for consumers and the economy more broadly, that commitment matters more than ever.  Over the last year, despite cost pressures from new regulation, we have increased our investments in keeping prices low, further improving quality and offering even better service.  Customers are choosing to shop more with us as a result, leading to our highest market share for over a decade.  Our investments have been made possible by our Save to Invest programme, which has delivered over £2.2bn of savings over the last four years, funding lower prices for customers and higher pay for colleagues, including our recent 5.1% increase in UK hourly pay.  Recognising their exceptional service over the last year, I am also pleased to announce a £65m special performance award for colleagues in our stores, distribution centres and customer engagement centres.

Our further investments in value included tripling the number of products on Everyday Low Prices to 3,000, running alongside over 10,000 Clubcard Prices and more than 600 Aldi Price Match lines.  We have also continued to invest in quality and innovation, with over 2,000 new and improved products across the year, and Finest growing 15% to reach sales of £3bn.  We continued to meet customer needs wherever, whenever and however they chose to shop with us, with overall online sales growing 11%, including Tesco Whoosh growth of 51%.

Since setting out our multi-year performance framework in 2021, we have delivered meaningful progress for all our stakeholders.  As new opportunities and challenges have emerged, we have evolved our strategic ambitions, positioning us well to deliver sustained long-term growth by providing even better value for customers."

Sales growth across all markets with profit growth and strong cash delivery (on a 52-week basis unless otherwise stated)

EVOLVING OUR STRATEGIC AMBITIONS

Our goal is to create long-term sustainable value for all our stakeholders, by consistently delivering for customers.

Over the last five years, we have made meaningful progress, with material investments into price, quality and service, driving a significant increase in customer satisfaction and leading to our highest market share for over a decade.

The retail landscape continues to evolve.  Households have had to adjust to persistent cost of living pressures and competition remains intense, with new entrants and technologies giving customers more choice than ever.  Customer expectations are increasing too - in addition to great tasting, high quality food at the best possible price, they also want nutritious products that support their health goals, from a brand they can trust to do the right thing.

To continue delivering for all our stakeholders, we have evolved our strategic ambitions into five mutually reinforcing goals:

These build on our underlying strengths and allow us to deliver even more value for our customers, creating a path for long-term sustainable growth.  Further detail on each ambition, and the progress we have made this year, is set out below:

1) Winning in food

We want to deliver the very best value, quality, range, and innovation in food.  Delicious, affordable and nutritious food matters more than ever to our customers and their families, and our ability to provide this at the very best price underpins our whole business.  Through our market-leading presence across stores, online grocery and rapid delivery, combined with the reach of Booker's wholesale business, we are better placed than anyone to serve customers great value and great tasting food wherever, whenever and however they want to be served.

2) Meeting more everyday customer needs

We want to help customers with more of their daily needs, and the frequency and trust we earn through food allows us to serve a wider range of products and services.  In addition to further growth in existing offers such as F&F clothing, Pharmacy, Insurance & Money Services and Tesco Mobile, we are building emerging digital businesses such as Tesco Marketplace and F&F Online.  Meeting these additional needs helps deepen our customer relationships, while generating capital-light revenue streams.

3) Being the most strategic partner for suppliers

By using our unique data and insights to build new revenue opportunities and partnerships, we can work with our suppliers to become the most strategic retail partner for innovation and brand-building.  By leveraging our store and digital footprint we will grow advertising income with Tesco Media and, as we meet more everyday needs, we can further build our understanding of customers, creating a more holistic data set.  The additional insights, innovations and financial benefits we generate can flow back into our core customer offer, further enhancing the value we offer customers and reinforcing our ability to win in food.

4) Connected, personalised and loved by customers

We want shopping with us to be easier, more personalised and increasingly rewarding.  As the glue that holds the whole Tesco ecosystem together, Clubcard and new AI tools can make every interaction more seamless and relevant by anticipating needs, offering timely nudges and making smarter recommendations.  Our unrivalled store network will continue to meet local needs better than anyone, with our colleagues continuing to provide the most helpful service.

5) Long-term business sustainability

We are always looking for ways to further strengthen our resilience, efficiency and sustainability.  From best-in-class store, transport and distribution infrastructure, optimised through our ongoing Save to Invest programme, to resilient and secure supply chains, we are constantly evolving our business model to adapt to environmental and geopolitical change.  As a key enabler, we will continue to enhance our best-in-class retail technology capability, harnessing the power of AI.

CAPITAL ALLOCATION AND SHAREHOLDER RETURNS

Our strategy is underpinned by our unchanged capital allocation framework:

Over the past five years we have prioritised capital spend on high-returning areas which has helped drive growth and cash flow, in turn allowing us to steadily increase annual capital expenditure to £1.5bn, whilst significantly improving our return on capital employed (FY 25/26: 14.4%).  We will continue to prioritise disciplined reinvestment in the business, with a particular emphasis on new growth opportunities including technology, and initiatives which drive further productivity through our Save to Invest programme. 

With further opportunities to invest into high-returning projects, including warehouse automation and electronic shelf-edge labels, we expect capital expenditure of c.£1.6bn in the year ahead.

We see our share buyback programme as a critical driver of shareholder returns, reflecting the strength of our balance sheet and our confidence in continuing to deliver strong future cash flows.  In addition to £937m of dividends paid during the year, we also completed the £1.45bn share buyback programme we announced in April 2025.  Since October 2021, we have returned £4.3bn of capital through share buybacks, at an average price of 317p per share.

We are announcing today a further share buyback of £750m to be completed by April 2027.  Consistent with our policy to pay a progressive dividend, broadly targeting a 50% pay-out of adjusted earnings per share, we propose to pay a final dividend of 9.7 pence per ordinary share, which combined with the interim dividend of 4.8 pence per ordinary share paid in November 2025, takes the full year dividend to 14.5 pence per ordinary share.  See page 12 for more details.

MULTI-YEAR PERFORMANCE FRAMEWORK

We are confident that disciplined capital management and progress against our strategic ambitions will allow us to continue to deliver against the sales and profit ambitions of the multi-year performance framework we set out in 2021.  Reflecting our confidence in future cash generation, we are upgrading our medium-term free cash flow guidance range:

OUTLOOK

Reflecting the increased uncertainty caused by the conflict in the Middle East, we are providing a wider range of guidance than we were previously planning.

Much will depend upon the duration of the conflict and in particular, the potential implications for UK households and the economy more broadly.  At this stage, we are expecting to deliver adjusted operating profit of between £3.0bn and £3.3bn for the 2026/27 financial year.

We will continue to do whatever we can to deliver the very best prices, quality and service for our customers, and are targeting a further £500m saving this year through our Save to Invest programme, to help fund investments in our customer offer.

We expect free cash flow of between £1.5bn and £2.0bn, in line with the upgraded medium-term guidance range set out above.

GROUP REVIEW OF PERFORMANCE

On a continuing operations basis¹

The Group's statutory financial results for the year ended 28 February 2026 reflect a 53-week reporting period. Alternative Performance Measures (APMs) are presented for the 52 weeks to 22 February 2026 to aid comparability, except for net debt which is presented at the balance sheet date.  There is no impact from the additional week on Insurance & Money Services and Central Europe, which report to the end of February every year.  Unless otherwise stated, commentary is on a 52-week basis.

Sales² increased by 4.3% at constant rates with growth across all operating segments.  Group volumes continued to grow, supported by further investments in the customer offer, made partially in response to an increased level of competitive intensity in the UK.  Revenue increased by 3.3%, which included a (6.5)% decline in fuel sales, driven primarily by lower retail fuel prices year-on-year.

Adjusted operating profit² increased by 0.6% at constant exchange rates or 0.8% at actual rates.  We continued to invest in value, quality, and service, driving strong sales growth.  Combined with a further c.£535m delivered through our Save to Invest programme, this sales growth more than offset our investments into the customer offer and operating cost inflation.

Statutory operating profit for the 53 weeks to 28 February 2026 increased by 10.1%. The prior year was impacted by a £(286)m non-cash net impairment charge versus £(53)m in the current year.  The current year also benefited from an additional week's trading.

Adjusted net finance costs² were slightly lower year-on-year, reflecting lower effective borrowing rates on new debt issued, partially offset by higher lease interest costs.  In addition, FY 25/26 benefited from interest income earned on the c.£700m proceeds from the disposal of our Banking operations, which has now been returned to shareholders.  

The increase in tax on adjusted profit was driven by higher adjusted profit, with the Group's adjusted effective tax rate steady at 26.8% (FY 24/25: 26.7%).

Adjusted diluted EPS² grew by 6.0%, supported by £1.45bn of share buybacks during the year and growth in adjusted profit after tax².  Statutory diluted EPS for the 53 weeks grew by 16.9%, higher than adjusted diluted EPS² growth due to an additional week's trading and last year's non-cash impairment charge.  We propose to pay a final dividend of 9.7 pence per ordinary share, taking the full year dividend to 14.5 pence, up 5.8%.

We generated free cash flow² of £1,957m, up 11.8% year-on-year.  Strong working capital management and solid sales performance drove a net working capital inflow of £385m, which more than offset increased cash tax payments and increased capex in technology and our distribution network.

Net debt² increased by £(1,109)m, with the prior year including c.£700m of proceeds from the sale of our Banking operations, which have now been returned to shareholders, and lease liabilities increasing by £(168)m driven by lease renewals and extensions.  This increased our Net debt/EBITDA ratio to 2.1 times versus 2.0 times at the end of last year.

Further commentary on these metrics can be found below and a full income statement can be found on page 16.

Operating segment presentation - UK & ROI and Booker

As communicated at the half year, following changes to the Group Executive Committee, Booker, which was reported as part of the UK & ROI operating segment in previous years, now meets the definition of an operating segment, as set out in IFRS 8 'Operating Segments'.  Our full year results are therefore presented on this basis.

Footnotes: 

1.         In line with its treatment when presented last year, the performance of the Banking operations in FY 24/25 is presented as a discontinued operation. The Insurance & Money Services business (IMS) is presented on a continuing operations basis and therefore within the headline performance measures. There are no discontinued operations in the current year.

2.         The Group has defined and outlined the purpose of its Alternative Performance Measures, including its performance highlights, in the Glossary starting on page 42.  The Group's statutory financial results for the year ended 28 February 2026 reflect a 53-week reporting period, with the prior year reflecting a 52-week period to 22 February 2025. Alternative Performance Measures (APMs) for FY 25/26 are presented for the 52 weeks to 22 February 2026 to aid comparability, with net debt presented as at the balance sheet date. There is no impact from the additional week on the IMS and Central Europe businesses, which report to the end of February every year.

3.         Like-for-like (LFL) sales growth is a measure of growth in Group sales from stores that have been open for at least a year and online sales (at constant exchange rates, excluding VAT and fuel). LFL excludes revenue from dunnhumby, Insurance & Money Services and mall rental income as this revenue is not directly linked to the sale of goods.

4.         Capex excludes additions arising from business combinations, property buybacks (typically stores) and other store purchases and their associated refit costs. Refer to page 47 for further details.

Segmental review of performance: 

Sales performance:  

(exc. VAT, exc. fuel)^2,3 

Further information on sales performance is included in the appendices starting on page 51.

Adjusted operating profit² performance:

Further information on operating profit performance is included in Note 2 starting on page 22.

UK & ROI OVERVIEW:  

Like-for-like sales for the UK & ROI segment increased by 4.2%, with market share gains and volume growth in both markets.  The sales performance in the UK reflects a strong customer reaction to our targeted investments in price and the shopping experience, made partially in response to an increase in competitive intensity in the UK, with both markets also benefiting from warmer weather in the first half of the financial year.

UK & ROI adjusted operating profit was £2,745m, up 0.7% at constant rates.  The strong sales performance and a further contribution from our ongoing Save to Invest programme more than offset our investments in the customer offer and ongoing cost inflation, which included increased National Insurance contributions and the new Extended Producer Responsibility (EPR) levy.  

UK - Strong positive response to targeted investments driving further market share gains:  

Like-for-like sales grew by 4.2%, with growth delivered across all channels.

Overall market share increased by +24bps to 28.5%.  Across the last three years we have gained +122bps of market share and in December 2025 we reached our highest share in a decade.  Throughout the year we have continued to prioritise investment in our customer offer.  As a result, we have maintained our strong price position against the market, helping support a further year-on-year improvement in our net promoter score, including improvements across Value and Reputation.

Food like-for-like sales grew by 5.2%, with a strong contribution from fresh food which grew 6.9%.  We launched over 2,000 new and improved products, including a large-scale refresh of our frozen food offer.  Dine-in ranges, such as our Finest Valentine's and Finest Steakhouse ranges have performed well, as customers looked to enjoy restaurant inspired meals at home.  In the first half of the year, good weather helped support our sales and, later in the year, we were pleased with our continued market share gains and the customer response to our new and improved Christmas ranges.  Tesco Finest saw sales growth of 14.5%, continuing to benefit from strong volume growth.

In January, we expanded our Everyday Low Prices commitment from 1,000 to 3,000 products, sitting alongside Aldi Price Match on over 600 lines and thousands of Clubcard Prices every week.  Over 10,000 products were cheaper at the end of the year than at the start, with an average price reduction of 9.5%.

Clothing like-for-like sales grew 5.1% driven by a continued strong performance in womenswear, with expanded ranges in activewear and our curated 'F&F Edit' ranges both performing well.  Growth was also supported by the launch of F&F online during the year, which offers customers access to a much fuller range of clothing.

Home like-for-like sales declined (0.7)% but grew 1.8% on an underlying basis when excluding the impact of the transition to a commission model with the Entertainer for toys, which completed in the second half of FY 24/25.  The partnership, which offers customers an even better range of toys in our stores, means we no longer recognise toy sales and instead earn commission income.  Underlying growth was primarily driven by the continued success of our relaunched F&F Home range.

Like-for-like sales grew across both our large and convenience store formats.  Large store like-for-like sales grew 3.9% as we maintained our market leading availability and saw a positive customer response to investments made to the overall shopping experience, in particular in customer service and at the checkout.  Convenience like-for-like sales grew by 0.3%, with convenience market share growing +71bps year-on-year, with strong food performance offsetting the ongoing decline in the tobacco market.

Online sales grew by 11.2%, including a c.2ppts contribution from Tesco Whoosh, our rapid delivery service, where we extended national coverage to 73% of households.  Average online orders per week for our grocery home shopping business grew 6.0% year-on-year as we rolled out further improvements to our website.  The number of delivery saver subscribers increased by 7.6% to 834k, while online market share (which excludes rapid grocery) grew +30bps to 35.7%.

Average weekly traffic to Tesco Marketplace more than doubled during the year and average basket spend grew by c.90%.  As part of our work to further enhance the seller experience and provide an even better proposition for customers, we have now successfully migrated Tesco Marketplace to a new Mirakl platform. 

ROI - Ongoing volume growth driving further market share gains:

Our Ireland business delivered sales growth of 6.6% at constant rates, with strong like-for-like sales growth of 4.6%.  Our market share grew +32bps to 24.2%, the fourth consecutive year of share growth.  New space also supported sales growth, which included the opening of four new superstores and five Express stores during the year. 

Food like-for-like sales grew by 5.1%, with a strong contribution from our core fresh food offer.  Food growth was further supported by a strong Tesco Finest performance where sales were up 11.8% year-on-year.

We delivered like-for-like sales growth across all channels, with Online delivering 17.4% growth year-on-year.  We launched Tesco Whoosh in Ireland this year, which is now in 31 stores, and we expect the service to meaningfully contribute to our online business moving forward.  Large store sales grew 3.1% as we continue to improve price competitiveness in the market, with our price index improving year-on-year.

Non-food sales were broadly flat on an underlying basis when excluding the impact from the transition to a commission model with the Entertainer for toys.

BOOKER OVERVIEW - Robust growth across core retail and catering:

*Includes sales to small businesses and sales from Venus Wine and Spirit Merchants Limited, which was acquired in June 2024 and is included in like-for like growth from June 2025. 

Booker like-for-like sales grew 0.2%, with robust growth in core retail and catering offset by the continuing decline in the tobacco market.  Best Food Logistics delivered like-for-like growth of 0.6% despite continued weakness in parts of the fast-food market.

Core retail grew by 2.2%, including the impact from the ending of a lower-margin national account in August 2025.  We continue to see strong growth in our core symbol brands with a further 369 net new retailer partners across the year and we saw further improvements in customer satisfaction scores across our retail customer base.  Core catering performed well with like-for-like sales growth of 3.8%, supported by a strong contribution from Venus, our specialist wine and spirit merchant, and good weather over the summer.  Customer satisfaction scores also improved in catering, and we continued to deliver great value and availability.

Booker operating profit grew 0.7% to £292m, with a strong contribution from Save to Invest and sales growth helping to offset significant cost inflation.

CENTRAL EUROPE OVERVIEW - Strong delivery amidst increased competition and ongoing regulatory pressure:  

Like-for-like sales grew by 2.2%, with food growing by 2.6% across the region.  Fresh food grew by 4.1% as customers continued to value our competitive price position and high-quality offer amid increased competition and ongoing regulatory pressure.  Tesco Finest sales also continued to perform well, up 33.5%.  

Large, Convenience and Online all delivered like-for-like growth across the region, with Online growing by 17.5%.  Convenience like-for-like sales grew 3.1% and Large store like-for-like sales grew 1.4%, with the channel weighed by softer non-food sales, impacted by challenging consumer confidence and poor weather during key trading periods.  

Central Europe delivered adjusted operating profit of £115m, up 2.7% at actual exchange rates but down by (0.9)% at constant rates.  The decline in constant rate profitability includes the impact from the disposal of certain mall properties in the prior year.  Excluding this impact, adjusted operating profit grew 8.1% year-on-year at constant rates, supported by a strong contribution from our Save to Invest initiatives, helping to offset the impact of increased competition, particularly in Slovakia, and ongoing regulatory pressure.

Adjusting items: 

Adjusting items are excluded from our adjusted profit performance by virtue of their size and nature, to provide a helpful perspective of the year-on-year performance of our ongoing business. 

Total adjusting items in statutory operating profit from continuing operations resulted in a net charge of £(209)m, compared to a net charge of £(417)m in the prior period.

Whilst overall performance was strong across our operating segments, we recognised a non-cash net impairment charge of £(53)m in the current year, principally reflecting an increase in the competitive intensity in the Slovakian market.  In the prior year there was a £(286)m non-cash net impairment charge, mainly reflecting an increase in discount rates across the Group.

We continue to present amortisation of acquired intangible assets, principally relating to the merger with Booker, as an adjusting item.  The amortisation of acquired intangible assets was £(78)m (FY 24/25: £(76)m).

We incurred £(28)m of separation costs relating to the disposal of our Banking operations (FY 24/25: £(14)m), with the transition activities expected to complete in FY 26/27.

Restructuring and adjusting property transactions in the current year mainly relates to our Save to Invest programme and costs associated with our multi-year programme to optimise our distribution network in the UK.  The prior year costs primarily related to our Save to Invest programme.

Adjusting items in net finance (costs) / income and tax are explained in the relevant sections below.

Adjusting items included within discontinued operations in the prior year primarily related to fair value remeasurement of assets of the disposal group associated with the sale of our Banking operations to Barclays in November 2024.

Further detail on adjusting items can be found in Note 4, starting on page 24. 

Net finance costs: 

Adjusted net finance costs of £(531)m on a 52-week basis were slightly lower than last year (FY 24/25: £(536)m), reflecting lower effective borrowing rates on new debt issued, partially offset by higher lease interest costs.  In addition, FY 25/26 benefited from interest income earned on the cash received from the disposal of our Banking operations in the second half of FY 24/25.  Now that these proceeds have been returned to shareholders, we expect adjusted net finance costs to normalise to levels similar to FY 23/24 (£(558)m).

Within adjusting items, fair value remeasurements of financial instruments led to a charge of £(26)m, compared to income of £76m in the prior year.  The charge mainly relates to non-cash mark-to-market movements on certain derivative financial instruments which hedge inflation on some of our lease arrangements.  The movement principally reflects changes in long term UK inflation expectations since the start of the year.

Net pension finance costs decreased by £18m, driven by a reduction in the opening net deficit position of the defined benefit pension plans.

Statutory net finance costs of £(581)m were £(89)m higher than last year, largely due to the impact of adjusting items explained above.

Further detail on finance income and costs can be found in Note 5 on page 25, as well as further detail on the adjusting items in Note 4, starting on page 24. 

Group tax:  

Tax on adjusted profit on a 52-week basis was £(703)m, slightly higher than last year primarily reflecting an increase in adjusted profit, with the adjusted effective tax rate steady at 26.8% (FY 24/25: 26.7%).  The adjusted effective tax rate is higher than the UK statutory rate of 25%, primarily due to the depreciation of assets which do not qualify for tax relief.  We expect our FY 26/27 adjusted effective tax rate to remain around 27%.

Adjusting tax credits in both years primarily relate to deferred tax on impairment charges on qualifying assets and the amortisation of acquired intangible assets.

Statutory tax on profit of £(616)m was £(5)m higher than last year, primarily due to an increase in adjusted profit, partially offset by higher tax credits on adjusting items.

Earnings per share:  

Adjusted diluted EPS was 29.0p, 6.0% higher year-on-year, driven by a reduction in the number of shares in issue from our ongoing share buyback programme and growth in adjusted operating profit.

Statutory diluted EPS was 27.1p, a year-on-year increase of 16.9%.  The higher statutory growth rate in diluted EPS is due to a lower level of adjusting items in the current year and the effect of an additional week's trading profits.

Dividend: 

We propose to pay a final dividend of 9.7 pence per ordinary share, which combined with the interim dividend of 4.8 pence per ordinary share paid in November 2025, takes the full year dividend to 14.5 pence per ordinary share.  The full year dividend is based on our dividend policy to pay a progressive dividend, broadly targeting a 50% pay-out of adjusted earnings per share.

The proposed final dividend was approved by the Board of Directors on 15 April 2026 and is subject to the approval of shareholders at this year's Annual General Meeting.  The final dividend will be paid on 26 June 2026 to shareholders who are on the register of members at close of business on 15 May 2026 (the Record Date).  Shareholders may elect to reinvest their dividend in the dividend reinvestment plan (DRIP).  The last date for receipt of DRIP elections and revocations will be 5 June 2026.

Summary of Net debt (at the balance sheet date): 

*Net debt to EBITDA is calculated using EBITDA on a 52-week basis.

Net debt was £(10,563)m, an increase of £(1,109)m year-on-year.  The increase in net debt is mainly due to the prior year including c.£700m of proceeds from the sale of our Banking operations which were returned to shareholders via additional share buybacks during the year.  Lease liabilities increased by £(168)m driven by lease renewals and extensions, partially offset by the buyback of seven leasehold sites across the UK and Booker.

We generated free cash flow on a 52-week basis of £1,957m, which more than covered cash outflows relating to our ongoing share buyback programme of £(750)m and dividend payments of £(937)m.  

Our Net debt to EBITDA ratio was 2.1 times at the end of the year, up from 2.0 times at the end of last year. 

We continue to hold strong levels of liquidity totalling £2.9bn including cash, highly liquid short-term deposits and money market investments.  In addition, we have an undrawn £2.5bn committed revolving credit facility which is in place until at least November 2027.

Fixed charge cover remained broadly in line with last year at 4.1 times (FY24/25: 4.2 times).

Defined benefit pension schemes (at the balance sheet date): 

Net of tax, the net IAS 19 pension position improved from a deficit of £(180)m to a surplus of £220m, principally reflecting asset performance.  The principal defined benefit pension plan within the Group is the Tesco PLC Pension Scheme (the "Scheme"), a UK scheme that has been closed to future accrual since 2015.

During the year, we completed the 31 March 2025 triennial funding valuation for the Scheme together with the Scheme trustee.  This showed that the actuarial position of the Scheme for funding purposes was in surplus, with a funding level of 106% (31 March 2022: 104%).  As a result, it was agreed with the Scheme trustee that no pension deficit contributions would be required from the Group.  

Further detail on post-employment benefits can be found in Note 18, starting on page 35.  

Summary free cash flow: 

The following table reconciles Group adjusted operating profit to free cash flow (on a 52-week basis).  Further details are included in the Glossary starting on page 42.

We delivered free cash flow of £1,957m, with cash generated from operations improving by £522m year-on-year, driven by working capital inflows and growth in adjusted operating profit.  Free cash flow was £207m higher than last year, with the increase in cash generated from operations partly offset by higher cash capex, tax payments and own shares purchased for employee share schemes. 

The net working capital inflow of £385m is mainly driven by our solid sales performance, which led to higher trade payables, strong working capital management, and a payable relating to the new EPR levy.

Cash capex was £(123)m higher than last year reflecting incremental investments to optimise our distribution network, refresh and enhance our store estate, and deliver a more personalised and connected experience for our customers.

Net interest paid was £(15)m higher year-on-year, principally due to the timing of coupon payments.

Tax payments increased by £(142)m year-on-year mainly driven by the end of historical tax deductions and the prior year benefiting from a tax deduction arising on the disposal of our Banking operations.

Dividends received were £50m higher, reflecting dividends received from Insurance and Money Services.

Within the memo lines shown, the net £(18)m acquisitions and disposals outflow includes the settlement of deferred consideration on Booker's acquisition of Venus Wine and Spirit Merchants PLC.  The £(144)m net outflow relating to property transactions primarily relates to the buyback of seven stores in the UK and Booker.  Restructuring and property transactions in adjusting items of £(54)m primarily relates to operational restructuring changes as part of our Save to Invest programme.

Capital expenditure and space:

Space in the above table is defined as net space in store adjusted to exclude checkouts, space behind checkouts, customer service desks and customer toilets.  The data reflects space changes over the 53-week statutory financial year and excludes space relating to franchise stores.

Capital expenditure shown in the table above reflects expenditure on ongoing business activities across the Group, excluding property buybacks.

Our capital expenditure for the full year was £1,511m, an increase of £54m compared to last year.  We continue to invest in opportunities to grow our store estate and further enhance the in-store experience for our customers.  Over the course of the year, we opened a total of 77 stores in the UK, 9 in ROI and 7 in Central Europe.  Additionally, we refreshed 300 stores across the Group.

In addition to continuing to invest in our core assets, we have stepped up our investment in delivering efficiencies across our operations, including the opening of our Aylesford distribution centre and a first phase investment in our new distribution centre at DP World London Gateway.  The London site is expected to open in 2029 and will leverage the latest technology to enhance our supply chain and support future growth.

Statutory capital expenditure for the financial year was £1.7bn, including property buybacks and store purchases.

We expect around £1.6bn on capital expenditure in FY 26/27, as we continue to invest in attractive opportunities to optimise our existing operations, improve our technology and digital capability, whilst continuing to enhance our existing store estate. 

Further details of current space can be found in the appendices starting on page 51. 

Property value (at the balance sheet date):

1.    Stores, malls, investment property, offices, distribution centres, fixtures and fittings, work-in-progress.  Excludes joint ventures.

2.    Excludes fixtures and fittings.

The estimated market value of our fully owned property as at the year-end increased by £0.7bn to £17.7bn.  The increase was largely driven by a modest increase in rental values, with yields remaining fairly stable across the Group.  The UK & ROI increase in market value also reflects the buyback of seven stores in the UK.  The market value represents a surplus of £0.7bn over the net book value.  

Group store selling space ownership percentage was 60%, marginally higher year-on-year, driven by store buybacks in the UK.

Contacts

This document is available at www.tescoplc.com/prelims2526. 

A webcast including a Q&A will be held today at 9.00am for investors and analysts and will be available on our website at www.tescoplc.com/prelims2526. This will be available for playback after the event. All presentation materials, including a transcript, will be made available on our website.

We will release our Q1 Trading Statement on 18 June 2026.

LEI: 2138002P5RNKC5W2JZ46

Sources

Disclaimer

Certain statements made in this document are forward-looking statements. For example, statements regarding future financial performance, market trends and our product pipeline are forward-looking statements. Phrases such as "aim", "plan", "intend", "should", "anticipate", "well-placed", "believe", "estimate", "expect", "target", "consider" and similar expressions are generally intended to identify forward-looking statements. Forward-looking statements are based on current expectations and assumptions and are subject to a number of known and unknown risks, uncertainties and other important factors that could cause actual results or events to differ materially from what is expressed or implied by those statements. Many factors may cause actual results, performance or achievements of Tesco to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Important factors that could cause actual results, performance or achievements of Tesco to differ materially from the expectations of Tesco include, among other things, general business and economic conditions globally, industry trends, the outcome of any litigation, competition, changes in government and other regulation and policy, including in relation to the environment, health and safety and taxation, labour relations and work stoppages, interest rates and currency fluctuations, changes in its business strategy, political and economic uncertainty, including as a result of global pandemics. As such, undue reliance should not be placed on forward-looking statements. Any forward-looking statement is based on information available to Tesco as of the date of the statement. All written or oral forward-looking statements attributable to Tesco are qualified by this caution. Other than in accordance with legal and regulatory obligations, Tesco undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.