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First-quarter UK like-for-like sales up 5.1%

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Keeps profit outlook for 2025/26 year

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CEO says market 'remains intensely competitive'

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Says all UK players have 'upped their game'

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Shares up 2%

(Adds shares paragraph 3, CEO comments in paragraphs 5, 9-10,

analyst comment in paragraph 14)

By James Davey

LONDON, June 12 (Reuters) - Tesco ( TSCDF ), Britain's biggest

food retailer, reported a better-than-expected pick-up in

underlying sales growth in its first quarter and won market

share from rivals, saying improvements in value, product quality

and service were chiming with consumers.

The group, whose share of Britain's grocery market has grown

this year to 28%, a level not seen since 2016, did, however,

leave its profit guidance for the full year unchanged on

Thursday, with CEO Ken Murphy saying the market "remains

intensely competitive".

Shares in Tesco ( TSCDF ) were up 2% after it said UK

like-for-like sales rose 5.1% in the 13 weeks to May 24, having

been up 4.3% in the previous quarter.

Group sales were 16.4 billion pounds ($22.2 billion), up

4.6% on a like-for-like basis.

Murphy said the UK outcome reflected "our powerful value

proposition, strong availability and focus on product quality

and innovation".

Tesco's ( TSCDF ) update bucked wider industry data published on

Tuesday showing British consumer spending on non-food items lost

momentum in May as households' confidence in their personal

finances fell.

STAYING TOE-TO-TOE

Tesco ( TSCDF ) said it still expected to report adjusted operating

profit of between 2.7 billion and 3.0 billion pounds for the

year ending February 2026, down from the 3.13 billion pounds

achieved in 2024/25.

The group had said in April it expected profit to fall in

its 2025/26 year as it set aside cash to deal with a step-up in

the "competitive intensity" of the British grocery market - a

reference to a pledge of sustained price cuts from Asda, the

number three player, which has been losing market share.

"We're definitely seeing an intensification in competition,

I think that broadly though it's been a rational

intensification, in the sense that everybody is kind of staying

toe-to-toe with each other," Murphy told reporters.

"So you're not necessarily seeing massive movements in

relative competitiveness but everyone has, I think, upped their

game a notch."

He said inflation at Tesco ( TSCDF ) was running at below the industry

rate - which jumped to 4.1% in May, according to market

researcher Kantar.

Most analysts think Tesco's ( TSCDF ) strategy of matching the prices

of discounter Aldi on hundreds of key items, together with heavy

promotion of its Clubcard loyalty scheme, which provides lower

prices for members, is working well.

Tesco ( TSCDF ) is also becoming increasingly digital, stepping up

personalised engagement with customers and developing growth

avenues such as its online Marketplace platform and retail

media.

"(Tesco ( TSCDF )) appears to be in a better position than many of its

peers," John Moore, wealth manager at RBC Brewin Dolphin, said.

($1 = 0.7377 pounds)

(Reporting by James Davey, Editing by Paul Sandle, Jan Harvey

and Emelia Sithole-Matarise)