- Summary:
- Tesco share price has declined by more than 8% in the past five days because investors are afraid of escalating costs and Brexit related risks in the UK
Tesco share price is up by about 30 basis points today while the overall FTSE 100 index is down by more than 85 basis points today. However, the company’s shares have dropped by more than 8% in the past week. The shares were trading at £249 on Wednesday last week but they are now trading at £228.
Why Tesco share price has dropped
Tesco is not the only retailer whose shares have declined. The share price of Morisons and Sainsbury’s have declined by 6% and 4% while that of Marks and Spencer has soared by more than 5% in the past few days. MKS shares have climbed even though the company was included in a fallen angels list by S&P Global ratings.
So, why is Tesco stock price the worst-performer among the three main peers? Let us look at the YTD performance. While Marks and Spencer has done well this week, it is the worst-performing this year. The stock has declined by more than 57%. On the other hand, Tesco share price has declined by 10%, which is a better performance than FTSE 100, which has declined by more than 10%. Morisons have declined by 9% while Sainsbury’s have fallen by more than 10%.
The biggest factor affecting Tesco share price is costs and the overall economic situation in the UK. On costs, analysts expect higher costs by the company to affect its margins. The cost pressure has been exacerbated by the decision to hire more employees and increase its focus on online delivery. In a recent update, the company said that these initiatives would cost more than £925 million. To cope with increased demand, Tesco has hired more than 45,000 employees.
Another reason why Tesco stock price has fallen is that a prolonged recession will limit spending. Recent data has shown that retail sales in the UK have been on a downward trajectory. While the economy has started to recover, a prolonged recovery will affect sales.
Brexit affecting Tesco
The performance of Tesco has also been affected by Brexit. As a predominantly British company, it is exposed to the happenings on trade. Last week, the third round of Brexit talks ended without a deal. As the June 30th deadline nears, there are chances that the UK will leave the EU with no free trade agreement. This will also eat into Tesco’s margins.
Tesco Share Price vs Peers and FTSE 100
Brexit affecting Tesco
The performance of Tesco has also been affected by Brexit. As a predominantly British company, it is exposed to the happenings on trade. Last week, the third round of Brexit talks ended without a deal. As the June 30th deadline nears, there are chances that the UK will leave the EU with no free trade agreement. This will also eat into Tesco’s margins.
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If gold prices were to trade above the October 25 high of $1518.41, then the price might be able to reach the $1563.14 level, as the difference between the upper and lower limit of the pattern is added to the October 25 high. On a break to the October 11 low at $1473.68, the price might be able to reach the $1428.95, as the difference in the range is subtracted from the October 11 low.
Time will tell if bullish or bearish traders will command price as the chart pattern itself is neutral in its outlook.