London, Jan 23, 2026, 09:40 GMT — Regular session
- Early London trading saw Tesco shares rise roughly 0.4%.
- UK retail sales climbed unexpectedly in December, offering a new snapshot of consumer demand.
- With Tesco’s April results looming, investors are closely watching cost pressures hitting grocers.
Tesco PLC shares edged up on Friday, trading at 418.0 pence by 0940 GMT, a modest gain of around 0.4% from the prior close of 416.3 pence. 1
The UK’s biggest grocer often acts as a gauge for household budgets — yet it also behaves like a defensive stock when nerves hit the market. This tug-of-war is crucial now as investors debate if consumer spending is leveling off or simply moving online and toward essentials.
Retail sales volumes rose 0.4% in December from November, the Office for National Statistics reported, defying economists’ forecasts for a 0.1% decline. Neil Birrell, chief investment officer at Premier Miton, said the data points to the UK consumer being “in better shape than expected.” Thomas Pugh, chief economist at RSM UK, highlighted that savings patterns and political risks remain key variables for confidence. Major retailers offered cautious outlooks for 2026 in their post-Christmas updates, with Tesco called out for outperforming the broader market, while some competitors noted softer spots. 2
For Tesco, stronger demand offers some relief — shoppers upgrade, basket sizes stay steady, and there are fewer unwelcome shocks. But it also cranks up the competition, as everyone chases the same pound.
Cost pressure remains stubborn. Morrisons, the UK’s fifth-largest grocer, pointed to rising expenses as the reason for flat annual core earnings this week. CEO Rami Baitiéh said, “We had a good Christmas in 2025, providing a solid foundation for the first quarter.” Morrisons referenced industry data showing it still trails traditional rivals like Tesco and Sainsbury’s, while Aldi and Lidl continue to drive price competition. 3
Tesco’s January 8 trading update raised its full-year adjusted operating profit forecast to the top of its guidance range, following a robust Christmas period. CEO Ken Murphy acknowledged that “competition is as intense as ever,” stressing that value remains key for customers. He highlighted an expanded “Everyday Low Prices” strategy, combined with price matching and loyalty deals. The retailer plans to release preliminary results on Thursday, April 16. 4
The upside isn’t without risks. If households choose to save instead of spend, or if political turmoil undercuts confidence, retailers could be forced into deeper promotions, squeezing grocery margins sharply.
Tesco shares will next react to the April 16 results. Investors will be zeroed in on margins, cash flow, and how aggressively Tesco intends to maintain its price investments going forward.
