Tesco's share price has fallen today (December 2nd) after the supermarket's stock was downgraded by a major broker.
HSBC stated that Tesco ought to cut costs and try to hurt its rivals, rather than embarking on its current efficiency plan.
The stockbroker therefore recommended its clients reduce Tesco in their share portfolios from a "neutral" weighting to "underweight".
HSBC also cut its target for the share price from 400p to 340p, with the stocks dropping by over two per cent early in the morning.
David McCarthy, head of European consumer and retail research at HSBC, said questions should be asked about Tesco's strategy of trying to keep operating profit margins at 5.2 per cent when it is expected to lose sales.
He said: "Cost-cutting may help short term, but this is likely to result in "consumer unfriendly" actions, causing further sales declines and creating even more margin pressure."
At 13:58 GMT this afternoon, the share price of Tesco was 2.54 per cent down at 339.40.
Find up to date information on the FTSE 100 and spread betting strategies at City Index
GAIN Capital UK Limited (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.