Tesco share price remained in a tight range on Thursday after the company published strong financial results and lifted its outlook. TSCO was trading at 435p, down slightly from the year-to-date high of 448p. It has jumped by over 40% from its lowest level this year.
Tesco reports strong financial results
Tesco, the biggest retailer in the UK, is doing well even as the economy remains in a stagflation. Stagflation refers to a situation where an economy is slowing while inflation is high.
Recent macro numbers have shown that the UK’s inflation rose to 3.6% in August. The economic growth has stalled this year because of high interest rates and taxes, and low productivity growth.
In a statement, Tesco said that its group sales jumped to £33 billion in the year’s first half, up by 5.1% from the same period last year. Also, the adjusted operating profit rose slightly to £1.67 billion.
Most importantly, the company said that its free cash flow rose by 2.9% to £1.2 billion. Notably, Tesco continued to boost its market share by 77 basis points to 28.4%.
It has gained market share for 28 consecutive weeks, with its brand perception increasing. The market share gain is mostly because of its strong branch presence in the UK, where it has almost 3,000 stores.
Tesco also benefits from its scale, which helps it to negotiate with suppliers at friendlier terms. This market positioning has helped it to match its prices with that of other companies like Asda. In a statement, Ken Murphy, the CEO said:
“Competitive intensity remains high, and with continued pressure on household budgets, we remain committed to ensuring customers get the best possible value by shopping at Tesco.”
Tesco’s business has also benefited from its digital solutions, which have done well in the past few years after the pandemic. Its online sales jumped by 11.4%, while its market share in the sector rose by 112 basis points.
Tesco’s management believes that its profit will be higher than previously thought. It sees its profit rising to £3.1 billion this year, up from the previous £3 billion.
Tesco share price technical analysis
The daily timeframe chart shows that the TSCO stock price has been in a strong bull run in the past few months. It has formed an ascending channel and is now in its middle level.
Tesco share price has moved above the 50-day and 100-day Exponential Moving Averages (EMA). These indicators mean that the stock has more upside.
Therefore, the most likely scenario is where the stock continues rising as bulls target the important resistance level at 500p. The bullish forecast will be confirmed when it moves above the year-to-date high of 450p.
In addition to its technicals, the stock will benefit from its top fundamentals, including the strong dividend, revenue growth, and market share.
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