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Up until the last month or so, the biggest of the ‘Big Four’ supermarkets was having a rollicking good 2019. Starting at £1.90, a steady climb – with a pair of sharp rises in early January and April following their respective trading statements – left Tesco shares at an 8-month peak of £2.54.

Yet it has unwound some of that growth since the end of April, with a chunky, near-5% fall coming on May 29th as Kantar revealed that the company’s market share had fallen from 27.7% to 27.3% year-on-year for the 12 weeks to May 19th. Tesco shares now sit at a current trading price of £2.30.

April’s full year results were very well-received, for good reason. Group sales rose a hefty 11.5% at actual exchange rates, with revenue up 11.2% to £63.9 billion and like-for-likes rising 1.4%. The headline-grabber, meanwhile, was a 28.8% surge in pre-tax profit to £1.674 billion, an improvement that cemented the company’s turnaround following the accounting scandal 4 years ago.

It wasn’t all perfect. There was a distinct softening in like-for-like sales in the second half of the year, from 2.2% in H1 to just 0.7% in H2. However, Tesco said that while the market ‘remains uncertain’, its performance to date is ‘strong’.

Broker guidance

In financial 2019/20, analysts are expecting Tesco to post a 1.5% rise in revenue to £64.9 billion, alongside another 26% increase in pre-tax profit to £2.117 billion. Investors, then, will be on the lookout for any signs that this won’t be the case when it posts its Q1 statement on Thursday, especially with Kantar’s claim that the company’s like-for-likes flattened out in the most recent 12 week reporting period.

Tesco shares have a consensus rating of ‘Buy’ alongside an average target price of £2.78.

This article is brought to you in association with Spreadex. All opinions expressed in this article are from the author and do not necessarily represent the opinions of The Armchair Trader. You can find out more about Spreadex products and services here, or find more articles from Connor Campbell here.

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Connor Campbell

Connor joined Spreadex in 2014 as part of a newly expanded financial analyst team after graduating from the University of Southampton with an MA in English. His focus is on providing Spreadex's customers with up-to-date and informative news, and is responsible for the market analysis found on the Spreadex website.

Connor produces three daily market updates, a daily stock earnings preview, a weekly financial market preview piece every Friday, a round-up of all the big financial stories making the weekend press every Monday morning and regular stock market features.

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