Supermarket shares crash as Tesco’s warning takes effect

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The share price of listed supermarkets plummeted yesterday after grocery giant Tesco issued a stark warning on the effects of the cost of living crisis.

The UK grocer sent shockwaves through the sector as it downgraded its full-year profit expectations despite saying preliminary profits had tripled.

Tesco said that a perfect storm of rising wages, energy and distribution costs, a return to pre-pandemic shopping habits and fierce price competition could impact its margins.

The bleak outlook for the year sent grocery shares spiralling, wiping £1bn off the market value of Sainsbury’s and Marks & Spencer.

Yesterday, Tesco shares lost 2% or 5.4p, down to 265.2p yesterday, and Sainsbury’s shares lost 2.5% or 6p, to close at 238.6p.

Ocado was the worst hit, falling by 2.6%, or 31p, to 1153.5p, while M&S shares tumbled 2.1%, or 3.25p, to 150.1p.

Shore Capital analyst Clive Black downgraded his recommendation for Tesco from “buy” to “hold”. He added that if Tesco catches a cold he would expect others “to catch influenza”.