Tesco share price news: a bright 2021 ahead?
The latest Tesco share price news shows a strong performance over Christmas, but how is 2021 shaping up for Britain’s biggest retailer?
As we head into 2021, there’s been no shortage of Tesco share price news for investors to chew over. And of course, the pièce de resistance has been how the supermarket performed over the crucial Christmas period. Updating the City, Tesco revealed that sales surged by 8.1 per cent in the six weeks to January 9.
Another upbeat spot of Tesco share news came courtesy of online sales growth. In the 19-week period covering Q3 and Christmas, this rose by a staggering 80 per cent – resulting in an additional £1bn of purchases. As you’d expect, this was driven by healthy demand for its upmarket Finest range.
One challenge for the Tesco share price forecast in 2021 centres on the growing competition mounted by discount brands such as Aldi. The UK’s biggest supermarket chain has sought to tackle this head on by vowing to match prices on hundreds of products. Tesco executives say this aggressive strategy has started to pay dividends since it was launched in March.
The company said:
“Our value perception has increased by +450 basis points and we are now the most competitive we have been against the entire market in nearly a decade.”
And Tesco chief executive Ken Murphy added:
“Our focus on looking after our customers, including delivering record availability, robust safety measures and great value, has enabled us to maintain strong momentum through the Christmas period, outperforming the market every week.”
Here, we’re going to recap the latest Tesco stock news and reveal what analysts are predicting for 2021 and beyond as coronavirus continues to dominate the headlines.
Tesco share price news: a challenging climate
As we set out in the Sainsbury’s share price forecast recently, there are some big challenges facing Tesco as we head into a brand-new year.
Now more than ever, consumers are watching their pennies and are sensitive to price rises in the current economic climate. Like other essential retailers, Tesco has had to ramp up safety measures in all of its stores – and this has cost hundreds of millions of pounds. Unfortunately, the emergence of a more transmissive variant of Covid-19 has made this task even harder. One store in Manchester had to close for a deep clean after several staff members needed to stay at home to self-isolate.
And there are fears that history is going to start repeating itself. When awareness of coronavirus first began to grow early last year, panic buying in supermarkets was common – with people stocking up on staple goods such as toilet roll, pasta and hand wash. One significant bit of Tesco share news came when the company announced that it was reintroducing limits on the number of items that shoppers can buy. The retailer stressed that this was a precaution and that it wasn’t in response to a sudden surge in sales.
Brexit could also affect the Tesco share price forecast in 2021. The supply of fresh fruit and vegetables from overseas was especially hit when the transition period ended on New Year’s Eve – and although this did appear to be temporary, it’s fair to say that there will continue to be teething troubles in the first few months of 2021 at least.
Tesco shares: buy or sell?
Tesco didn’t suffer the dramatic falls in share price that other publicly listed companies endured as a result of last March’s sell-offs. Over the past 52 weeks, the stock has been trading in a fairly tight range of between 202p and 260p – a far cry from the glory days of 2007, when TSCO was trading above 450p.
Nonetheless, Hargreaves Lansdown (HL) is among those anticipating greatness for Tesco in 2021 – naming the company as one of its five stocks to watch. HL describes TSCO as a retail titan that’s well placed to capitalise on the shift to online shopping, a trend that’s only gained speed because of the pandemic.
Noting that Tesco is set to open 25 fulfilment centres in urban areas between now and 2023 – resulting in a weekly capacity of three million delivery slots – its analysts added:
“This opportunity sits on top of an already thriving store business. The pandemic hasn’t done anything to deflate its dominant market share.”
HL does acknowledge that there is one big cloud on the horizon: the recent sale of Asda to Zuber and Mohsin Issa, two billionaire brothers from Lancashire. There are concerns that this acquisition could trigger a new price war in supermarkets, cutting margins to the bone. The report added:
“But pricing pressure remains an industry-wide issue. Consumers always want more for less … don’t expect rocket-fuelled profit this year, operating profits are expected to be 25.3% lower.”
Should I buy Tesco shares?
Overall, Tesco share price news shows a resilient business that is weathering the storm of coronavirus as best as it can. Some of its smaller Express stores, usually based in city centres, have struggled to contend with a dramatic drop in footfall – with greater numbers of office workers continuing to work from home. And in the future, there will need to be tough discussions about its Extra branches. These supermarket outlets are cavernous and feature a plethora of product lines that extend beyond groceries. Will the shift to online, and the dominance of Amazon, mean a time will come where the Extra brand has run its course?
Trade Tesco PLC – TSCOl share price
Let’s wrap up with a look at how 2021 is shaping up – and whether analysts regard Tesco shares as a buy or sell. Based on recent Tesco share price news, two analysts currently have a Buy rating on TSCO stock, while nine say it will outperform. Three have a hold rating, and two believe shares will underperform the market. No sell recommendations are in force.
Looking ahead to the next 12 months, the high-end forecast indicates a 30.4 per cent boost in Tesco’s share price to 315p. Meanwhile, the median estimate comes in at 287p – a 18.8 per cent rise from current levels. Last but not least, the low-end projection anticipates that we could see a drop of 13.9 per cent to 208p.
Things appear to be looking up for Tesco. It’ll be especially interesting to see whether Covid-19 results in permanent changes to shopping patterns, or whether consumers will revert back to their old trends once things start returning to normal. Given its aggressive investment in online channels, it looks like Tesco is betting on the latter.
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