Tesco has lowered its profit expectations for the 2025/26 financial year, despite a 10.9% increase in its group adjusted operating profit.

The supermarket saw its group adjusted operating profit reach over £3.1bn in the year to 22 February, while its group sales increased by 4% to £63.6bn.

Tesco's revenue increased by 2.5% to £69.9bn, although its profit before tax fell by 3.2% to £2.2bn.

However, its earnings per share including discontinued operations increased by 42% to 23.51 pence and its profit after tax jumped by 36.7%, to £1.6bn.

Chief executive at Tesco, Ken Murphy, said: "Our continued focus on value and quality, coupled with market-leading availability, has contributed to another year of increased customer satisfaction and our highest market share for nearly a decade. We have invested in bringing great prices to our customers throughout the year, and continued to innovate with over 1,600 new or improved products including 400 new Finest lines, where overall sales grew 15%.

"We are also making significant progress on our long-term growth opportunities, further enhancing our digital capabilities with increased personalisation, further improvements to our online experience and an expanded retail media offering."

Looking ahead, Tesco said its investments over the last four years had resulted in the "most competitive position" it has been in for "many years", and that it had "delivered well against the multi-year performance framework" set out in 2021.

However, Tesco has seen a "further increase in the competitive intensity of the UK market", and has therefore lowered its profit guidance from £3.1bn in the latest full financial year to between £2.7bn and £3bn for the 2025/26 financial year.

It also expects a free cash flow within its medium-term guidance range of between £1.4bn and £1.8bn.

Furthermore, Tesco has launched a new share buyback scheme totalling £1.5bn, to be completed by April 2026.

Equity analyst at Hargreaves Lansdown, Aarin Chiekrie, added: "Tesco continues to stand out as a British powerhouse, with further sharpening of its proposition helping the group record its highest market share in nearly a decade. Despite a slight pullback in its share price of late, the underlying story looks good as revenue and profits motor higher.

"Looking ahead, guidance for this year looks a little conservative, leaving room for positive surprises. With operations focussed on this side of the Atlantic, President Trump’s tariffs pose little threat to disrupt operations directly. Shareholder returns remain a key part of the investment story, with dividends and a new £1.5bn share buyback programme backed by strong cash flows. With the valuation sitting below the long-term average, this looks like an attractive opportunity for investors looking to avoid some of the US-led volatility."

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