The Tesco share price will be in the spotlight today after the strong UK retail sales numbers. TSCO ended the day at 226p on Thursday, down more than 3% from its highest level this week.
UK retail sales jumped: Tesco is the biggest retailer in the United Kingdom. The company’s operations are predominantly in the UK after it exited some of its key global markets. Therefore, the company’s shares tend to react after the UK publishes its retail sales numbers every month.
UK retail sales jumped from 5.1% in March to 9.2% in April. This was a stronger number than the median estimate of 4.5%. It was also the biggest increase since June last year. On an annualised basis, the sales rose by 42.4%, a better performance than the median estimate of 36.8%.
At the same time, core retail sales rose y 9.0% in April, more than double the estimates. They rose by 37.7% on a year-on-year basis. Still, the YoY numbers are not all that relevant because of the lockdowns that were imposed in April last year.
However, these numbers show that retailers like Tesco continued doing well in the first month of the second quarter. If the trend continues, the company willl likely report strong results in the next earning season. Still, there are concerns about whether this growth will continue as the country reopens. Indeed, this week, the company warned about the risks posed by the virus, saying:
“Vaccines have been developed and are being rolled out with significant coverage in our core UK market, however uncertainty remains as to whether recent lockdowns and the vaccination programme are sufficient to bring the pandemic under control and allow normal life to return and, if so, when.”
Tesco share price outlook
In my latest article on the Tesco share price, I wrote that the stock would drop to about 226p. This prediction was correct as the stock is now trading at 226p. On the four-hour chart, the shares are trading at the 50% Fibonacci retracement level. The shares are also slightly below the 25-day and 15-day moving averages. Also, they are forming a symmetrical triangle pattern that is shown in orange.
Therefore, in my view, the shares will continue to consolidate in the next few weeks. As such, they will remain between 232p and 225p, which are the two levels of resistance and support.