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.

Should you invest £5,000 in Tesco Plc right now?

When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Tesco Plc made the list?

Mark Hartley owns shares in Tesco.

The post No longer just a grocer: here’s how a shift in strategy could help Tesco shares hit new highs appeared first on The Twelfth Magpie.

I still bore the scars of the ill-fated Philip Clarke tenure, which saw the UK’s top grocery chain slip from potential world beater to sector flop. Sir Dave Lewis, now at Diageo, righted the ship in 2014, and current CEO Ken Murphy continued the good work from October 2020.

How did the FTSE 100 grocer get it right?

Murphy named his big challenges as potential tariffs from Brexit, an economic recession, and the continued impact of the Covid pandemic. Investors wanted him to restore Covid-hit dividends and sell off Tesco’s banking arm.

The bank went to Barclays in November 2024, while operations in Thailand, Malaysia, and China were sold in 2020. Tesco retains operations in Hungary, the Czech Republic, and Slovakia. Mostly, though, it’s a play on the UK and the Republic of Ireland.

And that’s been enough. The Tesco share price is up 106% in the last five years, with dividends on top. They’ve increased at a compound annual rate of 9.6% over the last five years, although it’s been choppy at times as this table shows.

To be fair, it’s been a pretty choppy five years generally, with the Ukraine war, cost-of-living crisis, and post-pandemic supply chain issues. Murphy also had to navigate the latest round of this highly competitive sector’s regular price wars.

As its statutory pre-tax profits for the last five years show, 2022/23 was notably tough:

• 2026 – £2.403bn
• 2025 – £2.214bn
• 2024 – £2.289bn
• 2023 – £1.005bn
• 2022 – £2.033bn

Profit growth has been pretty unexceptional since. Yet, that hasn’t deflected the share price. It’s up 12.6% in the last year, but the rate of growth is slowing. In fact, it slumped 10.5% in May as the cost-of-living crisis flares up again due to Iran. Only two FTSE 100 stocks did worse.

Tesco also faces the constant threat from German discounters Aldi and Lidl, which have both overtaken Morrisons for market share. Tesco still reigns supreme with 28.2%, way ahead of second-placed Sainsbury’s with 15.2%.

Should you consider it today?

But it must fight every minute of every day to retain that edge. All while absorbing government intervention such as higher employer’s National Insurance costs, inflation-busting minimum wage hikes, and most recently, threats to impose price controls. Not easy while juggling wafer thin margins of around 3%.

Tesco has done a brilliant job but with a price-to-earnings ratio of 14.9, it’s more expensive than it was. The trailing dividend yield is a steady 3.37%.

Times are tough for consumer stocks, and I won’t be buying Tesco today. I’ll be keeping a close eye on its progress, looking for an entry point, as I’d love to hold this brilliant blue chip in my portfolio. I think Tesco has more to give. Just not right now.

Should you invest £5,000 in Tesco Plc right now?

When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Tesco Plc made the list?

Harvey Jones does not hold any positions in the companies mentioned.

The post Have Tesco shares got anything more to give? appeared first on The Twelfth Magpie.

Might they move higher and break through the £5 level again? Or could the recent weakness potentially be the start of a longer-term move downwards?

A business with lots of strengths…

Given that stock markets have had a good run of it in the past several years, it may be surprising that Tesco shares have performed well.

After all, supermarkets are often seen as a defensive pick that tend to grab investors’ attention more when markets are not doing so well.

But over the past year, Tesco shares have moved up 19% — nearly as good as the 20% increase seen in the FTSE 100 index over that period.

Over five years, the retailer’s shares have performed even better. The Tesco share price has more than doubled in the past five years, compared to a 50% gain for the FTSE 100 during the period.

That may be in part because of the strengths Tesco has.

It is the UK market leader by a considerable distance. That offers the chain economies of scale, a huge customer base, and a prominent place in people’s minds when they think about shopping for groceries, whether instore or online.

…but also ongoing challenges

Alongside Tesco’s strengths, though, it is also worth thinking about some of the challenges it faces.

The UK grocery market is intensely competitive. That is set to get even worse over time, as discounters like Aldi and Lidl continue to expand.

That has led rivals including Tesco to pay more attention to keeping pricing keen, an ongoing risk to profit margins.

Inflation is rearing its head again in supply chains and higher shipping costs could push up the cost of importing. Meanwhile, Tesco is dealing with other increases in its cost base – as a large employer, growth in wages and National Insurance costs have added to its outgoings.

I’m not ready to invest

Still, this is a well-run, proven business that I see as having ongoing potential.

If investor momentum remains high, I think that could push Tesco shares above £5 again. That would be a 9% increase, which though substantial is possible over the course of a few months, as the 12-month share price growth I discussed above demonstrates.

Good trading news could also help boost the shares, for example if Tesco announces that hot weather is seeing demand for barbecue items, ales, ice lollies, and sunshades soar.

My concern, though, is about whether the price might go the other way.

Tesco shares already sell for 17 times earnings. That might not seem expensive for such a high-quality business: indeed, it is exactly in line with the price-to-earnings ratio of rival J Sainsbury.

But I do not see that as an attractive purchase price for a supermarket, even a well-run one. The industry is highly competitive and profit margins are razor thin.

So I will be looking at other UK shares to buy for my portfolio.

Should you invest £5,000 in Tesco Plc right now?

When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Tesco Plc made the list?

Christopher Ruane does not hold any position in the companies mentioned.

The post Can Tesco shares break through the £5 barrier again? appeared first on The Twelfth Magpie.

But after a stunning 69% surge in the past three years, Tesco is siting pretty just off a 13-year high. The question for shareholders now is: can this run continue?

Let’s take a look at the latest forecasts to see what the experts think.

Spreadsheets and stars

As I type, a single Tesco share is changing hands for 454p (or £4.54). That’s up from 378p a year ago.

Obviously it’s impossible to know for sure what price the stock will be trading at in 12 months’ time. But City brokers are paid to give it their best shot, and they currently have an average 12-month price target of 517p.

So, if their spreadsheets are right (and the stars align), Tesco shareholders could get another 13.9% boost to the value of their holdings by mid-2027.

But that’s not all, of course, because Tesco pays dividends. Indeed, until the recent share price outperformance, that’s what the stock was primarily bought for, along with its defensive qualities inside a portfolio.

According to the latest forecast, Tesco will dish out a dividend of 15.6p per share for the current fiscal year (FY 2026/27). That would be a nice 7.3% boost on the year before, and translates into a forward-looking dividend yield of 3.45%.

Looking ahead to next year, analysts reckon the dividend will rise to around 17p per share. So there’s decent income on offer here, albeit not spectacular.

Could things go pear-shaped?

Again, these figures aren’t set in stone, and the supermarket giant is currently navigating another tricky period. That’s because the Iran war is pushing up fertiliser, raw ingredients and transport costs, resulting in higher food prices.

Last month, UK food inflation accelerated to 3.7%. Alas, I’m already seeing this filter through to the shelves on my weekly shopping trip to Tesco. A Melton Mowbray pork pie (one of life’s great pleasures) is now just shy of £2, while meat and coffee have been ticking up.

Inflation is a double-edged sword for supermarkets. While it can push up headline revenue figures, many shoppers also change their behaviour to save money.

For example, they’ll trade down from premium brands to budget ones or just skip certain items altogether, resulting in smaller basket sizes.

And when household budgets get squeezed, discretionary spending is the first thing shoppers cut. But items like toys, homewares and clothes often carry higher margins than everyday food items. So this is far from ideal.

Finally, if things get really ugly, there could be more political pressure on supermarkets to cap prices on eggs, milk and bread (and hopefully premium pork pies!). If so, that could take a bite out of margins.

What about valuation?

Given this backdrop, is Tesco one to avoid? I don’t think so, as the stock’s trading at 13.5 times next year’s forecast earnings (a reasonable valuation).

On top of this, there’s the dividend, Tesco’s leading 28% market share, and ongoing share buybacks. For long-term income investors willing to look past the noise, I still think the stock’s worth considering.

Should you invest £5,000 in Tesco Plc right now?

When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Tesco Plc made the list?

Ben McPoland has no position in any of the companies mentioned.

The post Here are the latest dividend and share price forecasts for Tesco appeared first on The Twelfth Magpie.

In terms of money, that means that £5,000 invested in Tesco 12 months ago is now worth up to £6,245 today. Not bad for a supermarket.

But the more interesting question is, what happens next? Well, depending on which analyst you listen to, the next 12 months could look very different indeed.

What does the most bullish forecast look like?

At the optimistic end of the spectrum sits UBS, which currently carries a price target of 545p on Tesco. Compared to where the stock’s trading today, that represents a potential gain of around 21.7% paired with a dividend yield of 3.2%.

If that target’s hit, then a £5,000 investment today could also be worth roughly £6,245 by this time next year – a repeat performance of the last 12 months.

The reasoning behind UBS’s conviction is well-grounded. Tesco has been steadily rebuilding its market share in the UK, with Clubcard data giving it a structural advantage in customer loyalty and pricing intelligence. That’s an advantage which rivals simply can’t replicate overnight.

Now add in a resilient own-label food range that benefits when consumers trade down, and a free cash flow profile that continues to support both buybacks and a growing dividend. Suddenly, it’s easy to see why the team of analysts at UBS are so optimistic.

What could go wrong?

But not everyone’s as optimistic. Analysts at Jefferies, for example, have a more cautious price target of 460p. That’s 2.7% higher than today’s level. And even with the extra profit from dividends, a £5,000 investment right now may only grow to £5,295 in 12 months – nearly the same as what someone could earn in a high-interest savings account.

What’s got Jefferies so nervous? The cautious stance appears justified. The UK food retail market remains intensely competitive, with discounters like Aldi and Lidl continuing to take share at the value end of the market. While the company has so far proved quite resilient to this threat, it’s nonetheless applying pressure to margins.

Tesco’s vast operations also add complexity. And rising wage costs from higher Employer National Insurance contributions are expected to squeeze margins even further through 2026.

Throw in the extra risk of softer consumer spending, and the stage is seemingly set for a much more challenging market environment throughout the rest of 2026 and into 2027.

Where does that leave investors today?

In my opinion, I think the near-term projection for Tesco shares is somewhere between these two forecasts. This isn’t a story of explosive growth, but rather slow and steady compounding driven by genuine competitive advantages, a seemingly reliable dividend, and a management team that has consistently delivered.

For long-term investors willing to hold through the noise, I think Tesco shares could serve as a credible foundation for a quality portfolio, making it a FTSE stock worth considering in my mind.

Zaven Boyrazian has no position in any of the shares mentioned.

The post Prediction: 12 months from now, £5,000 invested in Tesco shares could be worth… appeared first on The Twelfth Magpie.

More accurately: you can rush them, but it’s a really bad idea. And I should know – I’ve done all three.

Some things take time

Some things in life just take time. If you’re trying to lose 10% of your body weight, it’s probably not advisable to try and do it all in a day. 

Likewise, you can try to write a PhD thesis in a week if you really want to. The trouble is it’s likely to be a lot worse than if you take more time.

It’s always natural to look for ways to do things more efficiently. But some things just don’t work as well if you try to do them quickly.

Earning passive income is one of these. There are stocks with huge dividend yields that offer big returns in a hurry.

The trouble is, taking the approach of piling into these is often a risky business. And doing so can be detrimental to your wealth.

18.2% dividend yield?!

As an example, consider B&M European Value Retail (LSE:BME). Right now, the stock comes with a massive 18.2% dividend yield.

That’s enough to turn £20,000 into £3,640 a year in passive income straight away. But investors do need to look a bit more closely.

One thing to note is that the dividend per share has fallen by 32% since 2022. That’s a sign things are moving in the wrong direction.

On top of this, the firm’s free cash flows are barely covering its dividend. And that’s not including what it spends on lease payments. 

That’s not to say B&M is a terrible business. It maintains some pretty impressive operating margins for a retailer. 

It is, however, to say that investors need to look at more than that 18.2% dividend yield. And they should certainly think about how sustainable it is.

A better option?

By contrast, I think Tesco (LSE:TSCO) is a stock that is worth considering. The underlying business looks like it’s in much better shape.

Compared with B&M, Tesco has much narrower operating margins. And that creates a risk of inflation cutting into profits. 

The firm, however, has some huge advantages that keep it moving forward. The most obvious is its massive scale. 

Tesco uses this to negotiate lower prices with suppliers. And it uses its lower costs to offer better value to consumers. 

Complicated it isn’t. But it’s an incredibly effective strategy in an industry where retaining customers is very difficult.

The dividend yield is currently 3.5%. That’s a lot lower than 18.2%, but it looks like a much more durable passive income opportunity to me.

Don’t rush

Some things in life just take time. And earning passive income is one of them. 

With £20,000, investors can find stocks offering an 18.2% dividend yield. But that doesn’t mean they should buy them.

The way to target £3,640 a year in passive income is to find long-term opportunities and let them grow. Over time, that’s likely to work better.

The post How to invest £20,000 to aim for £3,640 a year in passive income appeared first on The Twelfth Magpie.

Latest Worldpanel data shows its market share is holding up nicely at 28.1%. That’s streets ahead of second-placed Sainsbury’s at 15.5%. But as ever when a top blue-chip stock does this well, it raises the same question in my mind. Can it keep growing at this speed?

Does this FTSE 100 stock still offer good value?

Earlier this year, I decided Tesco was starting to look a little expensive, as the price-to-earnings ratio crept above 17. Today, it’s a fraction less challenging at 15.5. Which reflects a dip in the share price. Three weeks ago, on 22 April, the shares were doing nicely at around 495p. Today, they’re down 9.% to 452p, which would have reduced a £10,000 stake to £9,050.

It’s been a volatile time for shares generally, as the Iran war drives up oil prices and inflation. This threatens Tesco from two sides, raising its costs while squeezing shoppers. It runs to tight profit margins, now as low as 2.4%. That’s common across the competitive grocery sector, but doesn’t leave much room to manoeuvre.

Tesco highlighted the danger in its 2025/26 results on 16 April. These showed underlying operating profit up just 0.6% to £3.2bn, with cost inflation to blame. Profit guidance suggested a small decline in the current financial year. So how worried should we be?

As oil shortages loom, this could be a tough summer. I’m also concerned by the EY Item Club’s warning that that the UK would lose 160,000 jobs this year. Yet Tesco is arguably better placed than most to withstand whatever is heading our way, because of its mighty scale and deep supplier relationships.

Could summer throw up a better buying opportunity?

The runaway success of Tesco Clubcard, now held by 24m households, a staggering 80% of the total, helps. The group also generates plenty of free cash flow, around £1.75bn last year, with similar likely in 2026/27. That should secure the dividend. At 3.2%, the trailing yield is solid but not spectacular. Recent history has been a little patchy. Shareholder payouts were frozen both in 2021 and 2023, but subsequent growth has been strong, as my table shows.

I’ve been following Tesco shares for some years, but felt I’d missed my moment. The recent dip has revived my interest, and I think it’s worth considering again. I’m holding back for now as I suspect we’re in for a tough summer, and that could offer investors a better entry point. I’ll be monitoring events closely to see if we get one.

The post How much is £10,000 invested in Tesco shares 3 weeks ago worth today?  appeared first on The Twelfth Magpie.

Key rival Sainsbury’s was similarly impacted, but to a lesser degree. Meanwhile, more diversified retailers including Marks and Spencer, JD Sports and Kingfisher made moderate gains.

This is likely the result of short-term sector weakness, but it’s worth reassessing Tesco’s long-term appeal as a defensive income play. Over the past few years, the share price has steadily grown from around 10 to 15 times earnings. Its forward price-to-earnings (P/E) ratio is now estimated to be above 15 — the highest among UK retail stocks.

That begs the question: does it still have appeal as a defensive income play, or is it moving into ‘value trap’ territory? Let’s take a look.

Consumer confidence weakens

This week’s dip looks more like a patch of sector weakness than a big change in Tesco’s story. British retail sales rose 0.7% in March, and Worldpanel said UK grocery inflation eased to 3.8% in late April, with no clear early hit from Middle East tensions.

That said, the backdrop isn’t perfect. Consumer confidence has slipped to its lowest level since October 2023, and some UK retailers have reported softer trading in April.

So while Tesco remains resilient, analysts are right to be cautious about assuming smooth growth from here.

Income outlook

Caution aside, I’d say Tesco’s latest numbers still offer a strong argument for considering an investment. The company reported adjusted operating profit of £3.15bn, free cash flow of £1.96bn, and adjusted diluted earnings per share of 29p.

Meanwhile, it hasn’t forgotten its shareholders, maintaining a commitment to dividends and buybacks. For income investors, that’s where the core attraction still lies.

The dividend yield‘s expected to grow steadily from 3% to 3.6% over the next three years, while analysts expect annual payouts to reach about 17p per share by 2028.

However, growth expectations are more moderate. The average 12-month price target is only 513p, implying roughly a 7.39% increase from current levels. That certainly isn’t explosive growth, but it’s respectable enough for a defensive stock.

So while the forward P/E ratio of 15 is no longer cheap, it still looks fair for a market leader with strong cash generation.

My verdict

Aside from a slightly high valuation, another risk is that the market may have already priced in future gains. If grocery inflation cools faster than expected, or if consumer spending weakens, Tesco’s earnings momentum could slow.

Even so, the balance sheet, cash flow, and dividend outlook still give the shares a solid defensive profile. So for UK income investors, I feel it’s still worth considering as part of a diversified portfolio. 

The defensive business model blended with moderate income potential is just that right amount of balance a portfolio needs when markets get shaky.

However, for those chasing fast gains, there may be better options on the FTSE 100. Some I’ve identified recently include BAE Systems, AstraZeneca, and RELX – but I’m always eyeing fresh opportunities.

The post With a P/E of 15.4, my Tesco shares no longer look cheap. Are there better options out there? appeared first on The Twelfth Magpie.

No wonder Tesco shares can be a popular option when people are considering not just what groceries to pick, but also what shares might make it into their ISA.

How lucrative (or otherwise) has such an approach been lately?

Up by close to a quarter in just 12 months

Let’s take the past year as an example. During that period, the Tesco share price has increased by 23%.

Now, I think diversification is always important for an investor. It is never a good idea to put all your eggs in one basket. But thanks to having a new ISA contribution allowance open up each April, an investor may be able to put one year’s whole allowance (£20k) into Tesco shares while keeping their ISA healthily diversified, thanks to having invested some or all of their allowance in previous years.

That 23% increase in the Tesco share price over the past year means £20,000 invested in the supermarket back then should now be worth around £24,600.

As Tesco is fond of saying, every little helps – and for most of us, a near-25% gain within a year on one year’s ISA allowance is not just a little!

On top of that capital gain, there are also dividends to consider. At 3.1%, the current Tesco yield is a little above average for the FTSE 100 index. Someone buying at the lower price a year ago would be earning a higher yield though.

That is because dividend yield is a function of the dividend per share (which is typically the same for all of a company’s shares of a certain class) and the price they paid for their shares (which is specific to them).

So £20k invested a year ago ought to be earning roughly £760 in dividends annually.

Anything from Tesco?

That passive income stream sounds good to me – and so does the capital gain. But would Tesco shares be on my shopping list?

For now, the answer is no. I do like the company’s defensive qualities. Its economies of scale, huge customer and loyalty membership base and extensive store network are all strengths I think could help it keep doing well for years or even decades.

But the UK grocery market is brutally competitive, even for the leader. Profit margins are razor thin. They could get thinner yet, as Tesco is squeezed by food and full inflation on one side and consumer belt-tightening on the other due to the conflict in the Middle East.

After the past year’s rise, Tesco’s share price is now 17 times earnings. I do not see that as attractive for a business in a highly competitive industry with low profit margins. So Tesco shares are off my ISA shopping list.

The post An ISA stuffed with Tesco shares a year ago would now be worth… appeared first on The Twelfth Magpie.

The stock’s delivered a total return of 35.69% over the past 12 months, turning the average UK monthly take-home pay of £2,934 into around £3,981 in just one year.

The question now becomes, will Tesco shares do it again?

A stellar performance

Tesco’s rally isn’t luck. It’s the product of genuine operational progress while successfully communicating stronger value perception among British consumers.

After years of headwinds, including brutal discounter competition and margin pressure, Tesco’s found genuine momentum.

Management’s October 2025 upgrade to its full-year underlying operating profit guidance of £2.9bn-£3.1bn not only beat analyst expectations but also served as a powerful signal that Tesco had found its stride in the midst of a cost-of-living crisis.

When the results came out last month, management both delivered on its performance promises while simultaneously growing the supermarket’s market share to its highest level in over a decade. That’s despite the continued pressure from discount retailers, revealing the power of Tesco’s Clubcard loyalty scheme.

The timing of this progress also proved to be quite fortunate. With investors and fund managers alike rebalancing their portfolios into more defensive sectors on the back of rising geopolitical uncertainty, Tesco’s strong financial performance has made it a popular favourite in 2026 so far.

So with that in mind, it’s no wonder Tesco shares are on a bull run. But can it continue?

What happens now?

The economic landscape in 2026 is a tricky one. Rising labour costs and Employers’ National Insurance contributions are driving up costs for supermarkets across the country.

At the same time, fertiliser supply chain disruptions in the Middle East is expected to significantly drive up food costs later this year, putting even more pressure on British consumers. This nasty combination of rising expenses and limited ability to pass on costs to customers means Tesco’s margins are likely to get squeezed.

In response to this shifting landscape, management has committed to achieving £500m in annualised savings, in an attempt to offset this pressure through superior efficiency.

Whether or not this strategy will prove successful remains to be seen. But the group’s recent track record does show a pattern of robust execution from leadership. And that’s why the analyst team at UBS has recently reiterated its Buy recommendation with a share price target of 545p.

Compared to where Tesco shares trade today, that implies a potential 12% return over the next 12 months – enough to turn £2,934 into £3,297.

Is Tesco a good investment?

The pressure is definitely mounting for British supermarkets, especially since the already optimised operations of discount retailers like Aldi and Lidl put them in a far stronger starting position to navigate the incoming headwinds.

Nevertheless, Tesco does have some proven defensive traits that make it a potentially compelling stock pick for investors seeking shelter from market volatility. That’s why I think it definitely deserves a closer look.

The post £2,934 invested in Tesco shares 1 year ago is now worth… appeared first on The Twelfth Magpie.