The UK retail industry is seeing significant challenges as inflation rises and consumer confidence slips. As a result, the Tesco share price has tumbled in the past few weeks. It is trading at 265p, about 13% below the highest level this year. Similarly, fashion retailers like Asos and Boohoo are at their multi-year lows while Ocado and Sainsbury’s have all crashed.
The Tesco share price crashed hard last week after the company warned about margins and future growth. After having a spectacular performance in 2021, the company now expects profitability to thin in the coming year. Besides, the company is paying higher prices for products and labour. The company said that its selling price had declined by about 0.6% in its statement. As a result, it now expects that its operating profit for the year to February 2023 will be between £2.4 billion and £2.6 billion. This was lower than the previous £2.81 billion.
After the weak retail sales data, the Tesco stock price will be in the spotlight. According to the Office of National Statistics, UK retail sales declined by 1.4% in March. This decline followed another decline of 0.4% in February. On a year-on-year basis, sales rose by 0.9% in March. However, excluding the volatile food and energy prices, core sales fell by 1.1% leading to an annualised decline of 0.6%. These numbers matter because Tesco is the biggest retailer in the UK.
Tesco share price forecast
The four-hour chart shows that the TSCO stock price crashed to a low of 251p after its weak results last week. The shares have made a rebound in the past few days and reached a key resistance at 264p, which was the lowest level on March 8th. The stock has moved below the descending trendline shown in yellow. It has also declined below the 25-day and 50-day exponential moving averages.
Therefore, the overall outlook of the stock is bearish since it has formed a break-and-retest pattern, the next key support level at 255p. However, a move above the resistance at 270p will invalidate this view.