Tesco share price set to remain strong during uncertain times
Despite recent dips on the Tesco share price chart, the overall outlook remains positive for the retail sector’s bastion of resilience.
Tesco shares continue to make positive headway as the UK emerges from the Covid-19 crisis. Although Prime Minister Boris Johnson’s mandate that facemasks must be worn in all shops could cause a temporary drop in footfall, Tesco remains the proverbial darling of the retail world. Indeed, with the so-called ‘accounting errors’ of 2014 now a distant memory, the company has used its network of stores to good effect during the pandemic.
Stocking and restocking shelves faster than its peers and an abundance of emergency staff allowed first quarter (Q1) sales to surge by 8% to £13.4 billion. However, with increased costs, the full-year outlook is 'like to be at a similar level to 2019-2020'. That prediction has caused the Tesco share price chart to show a degree of inconsistency in recent weeks. From a high of 232p on 29 June, Tesco shares dropped to 211p on 9 July.
Tesco share price bullish amid continued uncertainty
However, since then, the retailer’s stock has risen. As the markets closed on 27 July, the Tesco share price was sitting at 220p. The recent bullish trend is yet another sign that, despite short-term fluctuations, the company’s outlook is strong. Covid-19 isn’t going away any time soon and, in some respects, it will never go away. Businesses may be forced to alter the way they operate indefinitely, and if recent weeks have shown us anything, it’s that Tesco is able to react and adapt better than most.
With an eye on the future, Tesco recently announced it will stop using outside contractors for certain cleaning tasks. With overheads peaking in May, the company is now trying to cut costs while maintaining proper levels of hygiene where it can. As a result, staff in 1920 of Tesco’s Metro and Express stores will be given new cleaning duties. The money-saving initiative may spark controversy in some quarters, but it’s another example of Tesco’s willingness to innovate at a time when businesses are struggling.
Ability to adapt keeps Tesco shares buoyant
Another sign that long-term success could be on the horizon for Tesco’s share price is an increase in online sales. During a five-week period at the start of the pandemic, Tesco doubled its online capacity. That move saw online sales increase by 90% in May and level out at an average of 48.5% during Q1. For the first time, Tesco is becoming as much of a force in the digital retail sector as the high street. In a post-Covid world, this could be telling. Even with CEO Dave Lewis departing in September, Tesco has shown its resilience in recent months.
It's this underlying strength that’s seen analysts predict a Tesco share price target of 273p. For those looking to invest, now could be the right time. Given what we know, Tesco is better equipped to deal with the unknown than its peers. Although life appears to be returning to normal, the threat of further lockdowns remains in place. Across the US, states are reverting to strict safety measures, and there’s nothing to suggest the UK won’t have to follow suit in the future.
If that’s the case, Tesco has the power to remain a bastion of consistency. What’s more, it’s already adapting to a world after Covid-19. Therefore, as an option, it offers the type of long-term promise investors look for. Does that mean Tesco shares are a dead cert? In a time of unknowns, certainly not. However, if there are more troubles ahead, it’s one of the retailers we know has the power to prosper in the midst of a crisis.
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