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On Friday 26 June, Tesco is due to announce its first-quarter figures and hold an annual general meeting. At the moment traders are probably more focused on the bonus scheme that is about to be activated for the new CEO Dave Lewis.
Considering the time that the new CEO has been in the job, the speculation surrounding the size of his bonus has unsurprisingly been overridingly negative. Mr. Lewis should prepare himself for a rough ride on Friday as the honeymoon period for the new head of Tesco looks to have already come to an end.
Institutional support for Tesco has been mixed and at the moment nine companies have it as a buy, 12 as a hold, and six as a sell. There is still a 10.8% premium to be had on the share price of 213p as the average twelve-month target for the shares is 236p.
The most recent report from Kantar has confirmed a trend that has now been in place in the food retailing sector for some time. That is the improving markets share of the smaller cheaper brands, such as Aldi and Lidl, whereas the major four players continue to see their dominance being chipped away at. The last Kantar report stated that Tesco’s market share has drifted from 29% down to 28.6%
There has been little reason to believe that the tough trading conditions that Tesco – and the other food retailers – has had to contend with in recent times are set to improve any time soon. The squeezed margins and shrinking market share all point towards a set of figures that are unlikely to surprise to the upside.
Having bounced off the 200p level the shares have spent the last two weeks clawing their way to higher levels. That said, a combination of poor news flow, moving averages and encroaching on over-bought territory in the relative strength index should all test the resilience of the bulls.