Iran War Uncertainty Cuts Tesco’s UK Sales Growth By More Than Half: What It Means

Tesco reported a slowdown in UK sales growth during the first quarter, even as it strengthened its position in the grocery market.

The retailer said shoppers remained cautious with spending amid ongoing economic uncertainty.

Overview Of Sales Slowdown

The retailer reported like-for-like sales of £13.4 billion for the three months ended May, representing a growth of 1.8%. The figure marked a sharp slowdown from the 4.2% increase recorded in the previous quarter and fell short of analysts’ expectations of 2.3%.

Strong demand through digital channels helped offset some of the weakness, with online sales climbing 8.9%, while total group revenue edged up 1% to £16.8 billion.

Factors Impacting Consumer Confidence

According to The Financial Times, CEO Ken Murphy said there was “no doubt that war in the Middle East was impacting consumer sentiment. I think that sentiment is really driven more by the fear and the anticipation of what might happen than what is actually happening.”

The supermarket giant expanded its commitment to match Aldi's prices on key grocery items across its Express store network, which now includes over 2,000 locations. Alongside the move, Tesco rolled out more than 500 new products and said it was well-positioned to continue its recent progress.

“I am pleased with our progress in the first quarter, with customer satisfaction up strongly and continued sales growth building on the exceptional performance we delivered last year,” Murphy said.

Wholesale Performance And Profit Outlook

Tesco's wholesale division, Booker, reported a 3.2% decline in sales during the quarter, driven by the exit of a lower-margin national account and a strong comparative period last year.

Despite the slowdown, the retailer maintained its full-year profit guidance, with analysts forecasting earnings of around £3.25 billion. However, investors remained cautious, sending the shares down 2.4% in early trade.

Tesco had flagged the possibility of lower annual earnings in April, warning that profits may fall year-on-year for the first time since 2023.

The company had reported healthy results for the year to February 28, with profit reaching £2.4 billion and group sales climbing to £66.6 billion.

Tesco's grip on the UK grocery market has strengthened considerably over the past year. Worldpanel figures indicate the retailer now holds an almost 29% market share, the largest proportion it has achieved in over ten years.