CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

Where next for the Tesco share price ahead of its annual results

Article By: ,  Former Market Analyst

Tesco share price: where next ahead of its annual results?

When will Tesco release its full-year results?

Tesco will release preliminary full-year results at 0700 BST on Wednesday April 14. This will cover the financial year that ran until late February 2021.

Tesco earnings consensus: what to expect

Tesco has performed strongly during the pandemic. With its stores having remained open and demand for online and click-and-collect services rising during the pandemic, Tesco reported a record Christmas and outperformed its peers with a ‘market-leading performance’.

However, whilst Tesco and other supermarkets have been among the few retailers allowed to stay open during lockdown, it has also led to a huge increase in costs. Supermarkets have had to ramp-up their lower-margin online operations and spend more on making their stores safe, hiring more staff and covering the cost of increased sickness and absences from existing employees. In January, Tesco warned it expected to incur £810 million in Covid-19 costs over the full-year, up from its previous estimate of £725 million.

Still, Tesco has said retail operating profit ‘is likely to be at least at the same level as in 2019/20’, which came in at £2.75 billion. However, that guidance excludes the £585 million worth of business rates relief that it is repaying to the Treasury.

A Reuters-compiled earnings consensus shows analysts are expecting lower revenue and profits across the board. Note that the adjusted operating figure below is typically reported by Tesco as operating profit before exceptional items and amortisation of acquired intangibles.

Tesco FY Earnings Consensus

2019/20

2020/21e

Revenue

£64.8 billion

£59.21 billion

Adjusted Operating Profit

£3.00 billion

£1.85 billion

Adjusted Pretax Profit

£2.27 billion

£1.14 billion

Reported Pretax Profit

£1.31 billion

£1.17 billion

What is the outlook for Tesco as the economy reopens?

Tesco entered a new chapter last year when major changes were made to the board as fresh faces took over major roles, and this will be the first set of full-year results to be presented by chief executive Ken Murphy, who took over at the helm last October.

His immediate job will be to convince shareholders that the supermarket remains well-placed as the economy starts returning to normal. It will have to adapt again as behaviour changes again. For example, people will be eating less at home now that restaurants and the hospitality industry reopens. However, Tesco boasts diversity and can capitalise through wholesaler Booker, which performed well when the Eat Out to Help scheme was running but has suffered since the hospitality industry was closed.

Operationally, Tesco and other supermarkets have made huge progress during the most disruptive year on record, challenged by the pandemic and Brexit. But investors want clarity on when financials will follow.

They will also want to know how dividends will fare going forward. Analysts are expecting the ordinary payout to fall year-on-year, although investors will take some comfort from the £5 billion that was returned via a special dividend in February, funded by the sale of its businesses in Thailand and Malaysia.

Also watch out for any news on Tesco Bank. The loss-making unit is likely to be sold-off in the future considering Tesco has already started separating the unit from its results and sold-off its mortgage book to Lloyds last year.

Where next for the Tesco share price?

Tesco’s share price hit a yearly high of 260p before tumbling lower and finding a floor at 217p. 

The price has been trending higher from 217 hit on March 5. It trades above its 6 week ascending trendline but failed to break through resistance at 236 the November high and December high 2020. The RSI is also supportive of further gains whilst it remains out of overbought territory. Although both the 50 & 100 EMA are flat suggesting that the longer term bias is neutral. 

Any move higher would need to overcome 236, before the bull's eye 240 high February 18 ahead of 260.  

Immediate support can be seen at 230 which is the confluence of the ascending trend line and the 50 & 100 EMA. This could prove a tough nut to crack. A break below this level could see the sellers gain momentum towards 217 the yearly low. 

How to trade Tesco shares

You can trade Tesco shares with City Index using spread-bets or CFDs, with spreads from 0.1%.

Follow these easy steps to start trading Tesco shares today.

  1. Open a City Index account, or log-in if you’re already a customer.
  2. Search for ‘Tesco’ in our award-winning platform
  3. Choose your position and size, and your stop and limit levels
  4. Place the trade 

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.

City Index is a trademark of StoneX Financial Ltd.

The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.

© City Index 2024