Tesco PLC’s (LON:TSCO) trading update has done little to change the rather negative mind set of the food retail team at Goldman Sachs.
In a note following Thursday’s round-up of festive trading, Goldman repeated its sell and 150p a share price target for Tesco.
That’s around 27% below the current share price, which is bumping along at 206p currently.
“Though food growth is positive, the trading number appears further confirmation that Christmas did not represent a material improvement in underlying market conditions,” the Wall Street bank said in a note to clients.
“In addition, the marked negative impact of the voucher reduction illustrates the structural difficulties facing large stores.”
Tesco said group like-for-like sales in the 13 weeks to November 26 grew by 1.5% year-on-year, with UK like-for-like sales up 1.8% and international like-for-likes ahead 0.6%.
However, over the Christmas trading period, which covered the six weeks to January 7, it only saw its group like-for-like sales increase by 0.3%, with 0.7% growth in the UK, but a 1.2% decline internationally.
“We continue to believe Kantar data in January will show that its latest market data, a positive surprise, was not indicative of a stronger underlying market,” Goldman said in its ‘sell’ note.
“On top of this, we believe the concentrated UK grocery market, still suffering from overcapacity, means that food retailers will be unwilling to fully pass through rising input cost inflation, limiting margin upside.”
Of the 15 analysts logged as following Tesco by the Broker Forecasts site, only three have ‘buy’ recommendations. Five are ‘sellers’, while the remainder reckon the stock is fully valued.
The consensus price target of 206p (which has increased from 182p six months ago) suggests the shares are up with events.