Tesco has been downgraded to a ‘Sell’ by one of its longest-standing fans in the City as the grocery sector comes under pressure.
Shore Capital moved Tesco to a ‘Sell’ for the first time since 1996 as head of research Clive Black said that it faces the “most difficult recovery of any grocer”.
He said that Tesco has joined Morrisons and Sainsbury’s in an “unholy trinity” of struggling grocers amid a tough time for the sector that has prompted Morrisons to embark on major restructuring and Sainsbury’s to reveal its first like-for-like sales fall in nine years.
But he said that Tesco’s “broad church and wide exposure” has made it particularly vulnerable to competition.
“There’s a lot of pressure on Tesco,” he added. “Industry-wide costs are rising and at the same time pricing is clearly much higher on the agenda for customers so there’s a potential for pressure on gross margins. But Tesco is more exposed than anyone. They have to regroup”.
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