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Tesco shares down after lowered guidance

Tesco saw a small rise in UK sales, but it was the changed guidance from the company, towards the bottom end of the range, that has steered the stock this morning.

Tesco H1 numbers

It's tough out there for businesses and customers alike.

That's the word from Tesco this morning as it produced its first half (H1) numbers. The supermarket group led by Ken Murphy was talking about the environment in which it's trading at the moment.

Adjusted operating profit was down 10% to £1.25 billion at constant rates for the UK and the Republic of Ireland. Adjusted operating profit was down 11.5%. You can see the weakness feeding through here in both profits and revenues.

But the UK like-for-like sales interestingly was up and it was better than expected. It was only a small rise of 0.7%. Bloomberg had estimates of just a fractional decline for this period, but the company warned that as a result of significant inflation pressures and consumer caution, annual profits would likely be at the lower end of its earlier guidance.

Share price chart

Let's take a look at the share price chart. I think this really says it all.

We've seen this dip recently where we have actually dipped below the low we had established back on the 27th of October in 2020. And you can see now, in fact the last few days, we traded to levels not seen since January 2019.

But in terms of what's going on today, initially we saw the stock up at a one-week high I guess on the back of what appeared initially to be some relatively good numbers coming through on the revenue figures here in the UK.

But when you weave in the rest of the picture and the caution that the company has exercised on its outlook the earlier guidance between £2.4 billion and £2.5 billion for the overall annual profits, the company is now guiding at the lower end of that range. It has paid a 20% increase dividend to 3.85p which was good as well. But I think overall the outlook here for Tesco is somewhat weaker and I think that's one of the reasons of why that after two hours of trade this morning the stock is down 2%, which is where we're sitting.

But I think this line here at 202 or £2 a share is going to be key if you get a break of that, I think that could well open the trap door for new lower lows at the moment.

At least Tesco is holding up, but it does paint a bit of a bleak picture for both businesses and consumers.


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