The Tesco share price has opened to a steep slump this Thursday. It is currently down 2.43% and has the potential for a further drop as investors react negatively to the crackdown by the UK’s advertising regulator on the company’s plant-based product ads and an outlook warning from Target.
The UK Advertising Standards Authority has banned six adverts for a range of plant-based products from Tesco, claiming that the ads in question contained potentially misleading content. An official statement quoted by Reuters said the advertising watchdog had received more than 170 complaints about the said ads, which claimed that there were environmental benefits derivable from switching from meat products to the company’s Plant Chef range of products.
US retailer Target’s earning guidance warning is also pressuring the Tesco share price this Thursday. Target has slashed its quarterly margin forecasts for the second time in a month, saying it would need to reduce its stock of discretionary items and offer deeper discounts to attract consumers. The pessimistic outlook is a direct consequence of the impact of rising inflation on consumer spending. As a result, a host of UK and European retail shares are trading lower.
The Tesco share price has been facing headwinds from reduced consumer spending as inflation chokes incomes. However, the latest consumer price index figures show that the UK now has 9% inflation, which is very close to the Bank of England’s 2022 inflation projections.
Tesco Share Price Outlook
The intraday slump in the Tesco share price looks set to test the resilience of the 253.3 support level (30 September 2021 low). A breakdown of this area opens the door toward the 246.6 pivot, the site of the 1 October 2021 low. Additional targets to the south that enter the mix on further price deterioration are 239.7 (17 August 2021 low) and 231.7 (5 August 2021 low).
On the flip side, a bounce on 253.3 allows for a potential recovery toward 259.8 (27 September 2021 and 7 June 2022 highs). The bulls must take out this resistance to prevent this level from becoming a new rally-sell area. This would allow for an additional recovery toward 264.8 (14 October 2021 and 8 March 2022 lows). Beyond this level, other upside targets are found at 269.6 (12 May 2022 low) and 276.8 (4 November 2021 and 3 May 2022 highs).