The Tesco(LON: TSCO) share price fell by more than 6% on Wednesday after warned the public about its margins. It fell to a 251p low, the lowest since October 6, 2021. This drop is 16% below its highest in 2022. Other UK stocks like Sainsbury and Ocado also fell hence the worst performers in the FTSE 100.
Tesco profit warning
Tesco is a popular UK retailer with a 20billion value and runs many stores in the UK, often compared with Walmart and Kroger.
In its Wednesday statement, Tesco reported that it expects a drop in profits this year due to high costs. It estimates an operating profit between 2.1 billion and 2.6 billion pounds, lower than its expectation last quarter.
Yet, Tesco performed well in 2021 with the increase in consumer spending. Its total revenue hiked by 6% to over 61.3 billion pounds, and so did its pre-tax earnings from 1.1 billion pounds in 2020 and 2.2 billion pounds in 2021, following its last week’s prediction.
Together with other retailers, Tesco is struggling. On Wednesday, data indicated a rise in UK consumer and producer inflation to its highest in 4 decades. The company warned of 10%inflation hike this year due to the ongoing Ukraine crisis.
Moreover, Tesco has challenges with its supply chain. It has to pay more in imports and logistics and its also required to pay its employees wages.
Regardless, Tesco’s positive features are attractive to investors, and due to its scale, it’s likely to emerge faster than other companies.
Tesco share price forecast
The daily chart shows that the TSCO stock price has been in a strong bearish trend. A closer look shows that the stock formed a bearish flag pattern that is shown in purple. This pattern is usually a bearish signal. It has also moved below the 25-day and 50-day moving averages while oscillators have been in a strong downward trend.
Therefore, there is a likelihood that the Tesco share price will continue falling as bears target the key support level at 200p.