Tesco shares buoyant after it joins ‘beat the street’ week
Ken Odeluga January 14, 2016 4:57 PM
<p>This is no UK retail renaissance, but UK investors seem grateful for the small mercies on offer. Shareholders applauded Tesco and Burberry on Thursday, […]</p>
This is no UK retail renaissance, but UK investors seem grateful for the small mercies on offer.
Shareholders applauded Tesco and Burberry on Thursday, after they became the latest high street names to confound the worst market fears.
UK supermarket No.1 topped a tanking FTSE after reporting its first group like-for-like sales result for four years of 0.4%.
But what really impressed was the return of positive same-store sales in the UK, which rose 1.3% year-on-year in the six weeks to 9th January.
The City was expecting a fall of exactly the same amount.
Lower prices, 4,000 more staff, and a painstakingly put together Christmas mix boosted volumes 3.5% and transactions 3.4%.
This has enabled Tesco to rebound from the ignominy of reporting one of the biggest losses in UK corporate history less than a year ago, to a position of industry leading growth.
By this point though, few investors will conclude that a turnaround has begun, whether at Tesco or for a supermarkets overall.
Comparison effects abound.
And Tesco itself has not let a spectacular Christmas during thrifty times go to its head.
It’s sticking to its forecast for £930m in operating profit.
In other words, Tesco recognises that the very factors that have pushed big grocers into their current fate have not gone away.
Tesco’s operating margin has latterly been negative by 9%.
The worst amongst its relative equals.
On that basis, investors are likely to pocket Thursday’s stock price rise, rather quickly, we suspect, given the current uncertain (even somewhat alarming) wider market backdrop, and TSCO’s respectable 15% run-up in a month.
Traders of City Index’s Daily Funded Trade in Tesco should keep on the gap between 157p and 164p—Wednesday’s close/Thursday’s open.
There’s a risk that it might be filled quite rapidly as momentum falters (Slow Stochastic sub-chart).
That said, whilst the current uptrend remains within its current virtuously broad channel, short-term support is likely at least at 145p and certainly at the reaction lows around 137p from earlier in the month.
TESCO DFT HALF-HOURLY CHART
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.