Tesco reported a slowdown in UK sales growth for the first quarter ending May 30, falling short of market expectations despite an increase in its market share. The supermarket chain's like-for-like sales in the UK rose 1.8 percent to £13.4 billion, below analysts’ forecasts of approximately 2.2 percent. Following the update, Tesco’s share price declined by 0.9 percent at the close after an earlier drop of 2.5 percent in morning trading.

Chief Executive Ken Murphy attributed the softer sales performance in part to economic uncertainty driven by the war in the Middle East, which he said has negatively influenced consumer sentiment. Murphy suggested that this sentiment is shaped more by fears and anticipation regarding the conflict’s impact than by direct effects. He also cited challenging year-on-year comparisons and poor spring weather as contributing factors, noting that warmer weather typically encourages socializing and increased grocery spending.

The UK grocery sector has become increasingly competitive amid continued concerns over inflation and the cost of living. Supermarket rivals have responded by reducing prices or matching promotions on a wide range of everyday items in an effort to attract budget-conscious shoppers. Morrisons, the sixth-largest UK supermarket, also reported a slowdown in like-for-like sales growth, with its second-quarter increase dropping to 2.2 percent from 2.8 percent in the preceding quarter.

Analyst Manjari Dhar of RBC Capital Markets commented that stabilization in volume losses by rivals such as Asda could limit the extent of Tesco’s future market share gains. Despite this, Tesco has maintained a cautious but steady outlook for the year amid ongoing geopolitical uncertainty, particularly related to the situation in Iran. The company projects adjusted operating profit will range between £3 billion and £3.3 billion.

Over the past year, Tesco has strengthened its position in the UK grocery market, holding a 28 percent share according to Worldpanel data—its highest level in over a decade. As the largest grocery chain in Europe by market value, Tesco continues to navigate a challenging environment shaped by economic pressures and shifting consumer behavior.