After a strong 2025 run on better profits and a higher dividend, Tesco (LSE: TSCO) shares are now flat year to date, sitting around 440p. That’s roughly 12.6% below their late‑February high of 508.2p.
It seems that early‑year momentum’s cooled, even though the underlying business is still grinding out growth.
Recent results showed revenue of £73.7bn and adjusted operating profit of £3.15bn, with group sales (excluding fuel) up 4.3% year on year.
But while macro factors are undoubtedly impacting the price, I think there’s more to the story.
Shifting focus to data
Rather than a simple UK grocery stock, Tesco’s emerging as an experiment in retail data, loyalty and media. Its Clubcard ecosystem now covers more than 24m UK households, giving the group a 28.5% grocery market share and access to first‑party data on a scale no other UK grocer can match.
The Tesco Media & Insight Platform captures about 58% of the British population each week, on par with Facebook and ahead of Sky in media reach terms. Analytics subsidiary Dunnhumby reports that multichannel campaigns on Tesco Media generate an average return on ad spend of £6.60, versus £3.80 on other channels.
That’s a compelling pitch to brands, and highlights why framing Tesco isnt ‘just’ a grocer.
CEO Ken Murphy has said he’s “very excited” about retail media and expects it to be “a meaningful contributor to profit” over the medium term.
When the boss talks about media profits in the same breath as food margins, you know the business mix is shifting.
Hidden recurring revenue
On top of standard grocery sales, Tesco now has several recurring revenue streams:
- Clubcard Plus, a paid subscription at £7.99 a month with benefits such as 10% off two big shops, that creates a small but steady subscription base.
- Retail media and data partnerships with players including The Trade Desk, LiveRamp and major agency groups that let brands monetise anonymised Clubcard audiences.
- Data‑driven partnerships with broadcasters and platforms, such as Channel 4 and Omnicom, extending Clubcard targeting off‑site and deepening that media moat.
Advertisers and partners tend to sign multi‑campaign or multi‑year arrangements rather than switching overnight. That adds a lot of defensiveness to the stock, aside from relying purely on weekly basket volumes.
It’s no accident The Telegraph framed Tesco’s ambition as taking on Amazon in retail media by targeting more than 20m Clubcard users with personalised advertising.
Of course, there are risks. Privacy concerns are real, even though Tesco stresses it does not “sell or share any individual customer data”. And ongoing geopolitical conflicts, including the Iran war, are already resulting in higher fuel and energy costs, which could ramp up supply chain expenses and food prices again.
If margins get squeezed, it could be harder to keep offering those attractive Clubcard Prices, which have now become a core profit-driver.
So is Tesco still just a supermarket stock?
From a price-growth perspective, Tesco seems to be slowing. At the same time, the intentional shift towards data and media looks like a smart move in today’s economic climate.
If it works out as planned, it could eventually help the group hit new highs – making today’s price appear significantly undervalued.
So for patient investors looking for a potentially undervalued stock with expanding defensive traits, Tesco seems a top pick to consider.
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Mark Hartley owns shares in Tesco.
