Tesco Share Price Could Face Pressure as UK Quarterly Sales Fall 1.5%

Summary:

The Tesco share price outlook indicates the potential for the price to face pressure after the quarterly fall in its sales year-on-year.

The Tesco share price opened Thursday’s trading session steeply lower after the company reported a 1.5% drop in underlying UK sales in the 13 weeks ended 31 May, compared with the same period in 2021. However, the stock was able to pare some of these losses when the company came out to reaffirm its full-year guidance for profit and cash.

The Tesco share price action seen on the charts indicates just how much rising inflation is impacting the company’s sales and its stock performance, as investors start to express worry about the affectation of the full-year outlook for the UK’s largest supermarket chain. It is now several weeks since NielsenQ and Kantar first raised the alarm as to the impact rising UK inflation would have on consumer spending and subsequently on UK supermarket sales. Tesco itself acknowledged in its latest guidance update that the market environment remains “incredibly challenging”.

The Tesco share price could face more pressure as research firm IGD predicts UK food inflation to rise to 15% this summer. The grocery industry research firm expects this inflation level to be maintained into 2023. The Tesco share price lost 0.06% in Thursday’s trading session and could be set for a lower open this Friday.

The Tesco share price finds itself within the range bordered by 253.3 acting as the ceiling and 246.6 acting as the floor. A breakdown of this floor opens the door toward the 17 August 2021 low at 239.7. Further price deterioration brings the 30 July 2021 low at 230.3 into the picture.

On the other hand, a push to the north challenges the 253.3 ceiling, and if a break happens, the next target in the queue will be the 27 September 2021/8 June 2022 high at 259.8. Above this level, additional resistance comes in at 264.8 (14 October 2021 low and 8 March 2022 high). 269.6 (14 March and 12 May 2022 lows) and 276.8 are upside targets that only gain validity if the price recovery exceeds 264.8.