Tesco Share Price is Unraveling: There’s Blood in the Streets

Summary:
• Tesco share price crashed to the lowest level since January 2019 after the company published weak interim results.

Tesco share price crashed to the lowest level since January 2019 after the company published weak interim results. The TSCO stock dropped to a low of 199p, which was about 35% below the highest level this year. It has crashed in the past seven straight weeks, making it one of the worst performers in the FTSE 100 index.

Tesco earnings review

Tesco published relatively weak financial results for the first half of the financial year. Its group revenue rose from £27.3 billion in the first half of the year of last year to over £28.1 billion. Tesco Retail’s adjusted operating profit dropped by 10% to £1.24 billion while Tesco Bank’s profit dropped by 6.9% to £67 million. 

At the same time, the company’s retail free cash flow dropped by 16.9% to £1.28 billion. Tesco’s operating profit dropped by 43% to £736 million while its profit before tax fell by over £413 million. In a statement, the company’s CEO said the following about its forward guidance:

“As a result, despite ongoing challenges in the market, we are able to maintain our profit guidance within our previous range, albeit towards the lower end.  We, therefore, expect a full-year retail adjusted operating profit of between £2.4bn and £2.5bn.”

Tesco, like other British retailers, is facing numerous challenges. For one, with inflation soaring, the volume of sales has dropped sharply in the past few months. At the same time, the costs are soaring, which means that its profits have slumped. Therefore, there is a likelihood that the company will take time to recover.

Still, Tesco is a wonderful franchise, with a 26.8% market share in the UK. This is almost double that of Sainsbury’s, which has a market share of 14.65%. Asda has a market share of 14.15%.

Tesco share price forecast

The weekly chart shows that the TSCO share price has crashed in the seven straight weeks. It has managed to move below the important support level at 202p, which was the lowest level in March 2020. The stock has crashed below all moving averages while the Relative Strength Index (RSI) has crashed to the lowest level in years. 

Therefore, the outlook for the stock is bearish, with the next key support to watch is 180p. A move above the resistance at 220p will invalidate the bearish view.