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What to expect from Tesco’s Q1 trading statement

All eyes are on Tesco as it issues its Q1 update, with the shares looking for a catalyst for a new push higher. Meanwhile, while Morrisons shares are edging up, the chart for Sainsbury’s seems stronger.

Tesco Source: Bloomberg

When is Tesco’s trading statement?

Tesco is expected to provide an update on its current trading on 18 June.

Tesco statement – what to expect

Tesco saw quarter one (Q1) sales rise 7.9% a year ago, which means the bar has been set quite high in terms of comparitives. Like-for-like sales rose 6.3% across the whole group for the year.

As the supermarkets begin to publish their numbers, it is becoming increasingly evident that the 2020-2021 period was an outlier, and that 2019-20 will be more of the proper comparison for the coming year. As lockdowns ease (mostly), the surge in online shopping will slow, if not reverse entirely, while some of the old habits of small, regular shops rather than one big weekly shop as we saw in 2020, will make a return.

Food price inflation will be another element to watch, and for Tesco as well as its peers the impact on margins will be the important element. A highly-competitive business, most price increases will have to be absorbed by the supermarkets themselves, rather than passing increases along to consumers, since that risks losing customers.

Tesco shares – technical analysis

Tesco shares have gained steadily since late April, and continue to target highs from earlier in the year. A dip to the 215p level found buyers in late April, as it did in early March, and with the price having cleared 230p the buyers appear to be in charge. A close below 220p would begin to reverse this view.

Tesco chart Source: ProRealTime
Tesco chart Source: ProRealTime

What about the others?

Morrisons has struggled to make headway since the end of March, when a rally to 180p ran out of steam and a dip to 167p took place. A second bounce in May to 180p also hit resistance, and we have seen a descending channel form since then which continues to contain any upside. Buyers will want to see a rally back to 180p that then breaks higher, while sellers will hope that a turn lower below 178p takes place to maintain the downward channel.

Morrisons chart Source: ProRealTime
Morrisons chart Source: ProRealTime

For Sainsbury’s the chart is more promising – after breaking out of a bullish wedge in February the price has found renewed bullish momentum, taking the price to a new two-year high. Recent weakness appears to be contained above 250p, with the upward channel so far firmly intact.

Sainsbury chart Source: ProRealTime
Sainsbury chart Source: ProRealTime

The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer.

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