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Tesco (LSE: TSCO) shares were seen as something of a hot potato after the 2014 accounting scandal. Shareholders were looking at heavy losses up to the early 2020s. The corner looks well and truly turned now though.
The Tesco share price rose 34% in 2023, then 23% in 2024, then 19% in 2025. Add on another 8% so far in 2026 and the picture’s looking much rosier.
There are dividends to consider too. Based on the 224p share price at the start of 2023, investors have collected yields of 5.2%, 4.9%, 5.6% and 6.4% in the years since.
All told, someone investing a £10,000 sum into Tesco shares at the start of 2023 would now be sitting on £24,050 (assuming dividends were reinvested and ignoring possible taxes and trading fees).
Pretty good going, if you ask me. And I think that could just be the start. Here are three reasons why this good performance could continue in the years ahead.
Good times
Firstly, Tesco has been increasing market share. Between 2020 and 2026, the total has increased from 26.6% to 27.9%. This has been achieved despite the continued rise of budget alternatives such as Lidl and Aldi, and also despite Tesco’s position as the clear leader among British big shops. That more customers are choosing to do their groceries with Tesco bodes well for its future.
A second reason is inflation. Tesco’s earnings have risen strongly during the recent period of high inflation. It’s likely that some part of the recent share price rise was because of keeping up with a high-inflationary environment. While this has led to accusations of price-gouging, I’m not sure I would call this egregious when the firm’s net margin has remained consistent at near the 2% mark.
A third reason is the UK’s growing population. More people living here means more customers. This offers a growth avenue for Tesco without restarting operations outside of the country (like the Asian markets that the company left in 2020). Even if it looks like net migration has peaked, most projections still have the population growing in the years ahead.
A buy?
There are risks to be aware of too, like the cost-of-living crisis. This has been an issue for years and could get worse because of inflation combined with a stagnant economy. If wallets are tight, then Tesco might see lower sales. This could be due to losing ground to competitors, or simply consumers in general shrinking the size of their shop.
Only time will tell whether the last few years were a purple patch for Tesco, or rather a sign of things to come. I think there are plenty of reasons to be optimistic, and that the shares are worth considering.
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John Fieldsend owns shares in Tesco.
This story originally appeared on Motley Fool
