Tesco (LON: TSCO) share price fell terribly on Friday with continued worries about the company’s margins and growth. The stock bounced back to a 269p low, the lowest since March this year.

Margin contraction

Tesco is the largest retailer in the UK with many workers. Therefore, it handled supply chain issues better than most retailers. Yet, the firm has gone through various challenges. On Thursday, the company reported a boost in employees’ salaries by 6% with continuing labour scarcity.

The report came soon after Sainsbury decided to boost wages by an equal sum to $14.43 per hour to mean hourly workers would be paid $13.21.

However, investors predict that this will affect the company’s margins with the rise in other items. The recent data by the Office of National statistics indicated the highest rise in the country’s inflation in decades.

Moreover, the rise in inflation means a reduction in-store purchases. ONS data shows a sharp drop in retail sales in January and February.

Hence next week is significant as the company will report its 2021/2022 year preliminary results. The management will also elaborate on the company’s growth and rising cost effects.

Tesco share price forecast

Tesco share price has been in a downward trend in the past few months. It has fallen by more than 11.40% from its highest level this year, meaning that it is in a correction. The stock has moved below the 25-day and 50-day moving averages, signaling that sellers are in control. 

Tesco shares have also dropped below the lower side of the bearish flag pattern that is shown in purple. Historically, the pattern is usually a sign that a bearish trend will continue. 

Therefore, while Tesco is a good stock to invest in, there is a likelihood that the share price will keep falling in the coming months. If this happens, the next key support level to watch will be at 250p.

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