I’ll admit it, I didn’t think Tesco (LSE: TSCO) shares had it in them. If you’d asked me a few years ago, I’d have labelled it a stodgy blue chip whose best days were behind it. And I’d have been wrong. So, what made me think that?

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?

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