June 2020

Tesco share price is down by more than 1.1% as traders wait for the company’s first-quarter earnings. The shares are trading at 224p, which is the lowest it has been since June 16. This makes it the worst-performing retailer in the FTSE 100, which has also declined by 0.88%. Sainsbury’s share price has dropped by 0.88% while Morrison Supermarkets has fallen by more than 1%. Ocado share price has fallen by almost 1%. Perhaps, investors are looking ahead to Tesco’s upcoming earnings. Tesco share price drops ahead of earnings Tesco share price has dropped by more than 12% this year, becoming the worst-performing retailer in the FTSE 100 this year. Sainsbury’s and Morrison’s share prices have dropped by more than 10.7% and 4.97% respectively. Tesco has lagged even after making some progress. For example, in March, the firm sold its large Asian business to Dhanin Chearavanont in a deal that was valued at more than $10 billion. The deal was opportunistic because the virus was not a significant deal early during the month. This deal led to a special dividend of more than $6.6 billion to investors. And this month, the company continued to divest its international business by selling its loss-making Polish operations. The total enterprise value of the deal was more than £181 million. Also, the FRC dropped its accounting investigation of the firm. Meanwhile, the company reported better-than-expected sales in the first quarter. The firm made a pre-tax profit of more than £1.32 billion in the fiscal year that ended on February 29. That was lower than the £1.62 billion that it made in the previous year. The revenue rose to £64.76 billion from the previous £63.91 billion. At the same time, the adjusted profit rose to £1.96 billion from the previous £1.56 billion. In the statement, the company said: "Covid-19 is having a material impact on the operations of our business and we are incurring significant additional costs, particularly in payroll as we recruit additional colleagues to meet demand.” Tesco earnings preview Tesco will release its earnings tomorrow. These will be the first results for the company during the coronavirus. We expect that the company will report better earnings considering that many people have increased their grocery shopping. As we reported a few weeks ago, retail sales in the United Kingdom bounced back in May. Still, because of the virus, we expect that overall sales will be less than what it reported last year. In the first quarter of 2019, the firm made sales of more than £13.9 billion. These sales included the Asian sales which will not be reported tomorrow. Also, we expect the company to complain about costs, which we expect to increase because of its investment in digital and fulfilment. Still, we expect Tesco share price to show some volatility ahead and after the release. Download our Q2 Market Global Market Outlook Tesco share price technical analysis The daily chart, Tesco share price has declined for the past three days. The shares are trading at £224, which is lower than this month’s high of £244. On the daily chart, the price is below the 50-day and 100-day exponential moving averages. And the volatility, as measured by the Average True Range (ATR) has declined to the lowest level since February. The low volatility is an indication of calm before the storm, which means that the price will see sharp swings tomorrow. As such, the key levels to watch are the support at £222 and the resistance at £234.