The Tesco share price has crawled back in the past few days even as the crisis in Ukraine continues, and the BOE ramps its tightening process. The TSCO stock is trading at 278p, about 5.48% above the lowest level this month. Still, it has crashed by over 8.75% from its highest level this year. It has also fallen by 6% year-to-date and underperformed the FTSE 100 index.
Tesco, like other retailers, is facing several difficult challenges this year. First, the company is struggling with the issue of inflation. Recent data shows that the average UK inflation jumped to a multi-decade high in January. And analysts expect this week’s inflation numbers to show another record number. As a result, its margin will likely be thinner as it pays more to acquire goods. In addition, wages have also risen, which will affect its profitability margin.
Second, after its stock jumped sharply in 2021, some analysts believe that its shares could struggle this year as some investors take profit. Besides, interest in UK retailers is expected to be a bit lower this year than what happened in 2021.
Third, with a crisis continuing in Ukraine, Tesco faces supply chain challenges. Besides, many shipping companies are ramping up their fees. This will have an impact on Tesco and other retailers. Another challenge is that the volume of online sales is expected to fall this year. Still, it is too early to know how the company will be affected. This information will likely come out in April when it releases its next results.
The daily chart shows that the TSCO stock price has been in a bearish trend in the past few days. As a result, it has moved below the 100-day and 50-day moving averages. A closer look shows that it has also dropped below the ascending trendline, shown in black. The stock is now forming a bearish flag pattern. Therefore, there is a likelihood that the stock will have a bearish breakout in the near term. If this happens, the next key support to watch will be at 250p, about 10% below the current level.
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