Goldman Sachs urges investors to sell Tesco shares

There are fears that supermarket giant Tesco could hit trouble.

Markets are open for just four days this week ahead of the Easter weekend and there are concerns that traders could attempt to clear out risky investments before the holiday.

Last week, investment bank Goldman Sachs, issued a devastating critique on supermarkets, warning that higher food prices would squeeze their profits and the bank urged investors to sell Tesco shares - a recommendation unheard of.

Tesco shares were down 3% last Friday, shares in Morrison’s and Sainsbury’s were also down and subsequently downgraded by Goldman Sachs.

The next four days are likely to see a range of crucial economic data which will rattle investors’ nerves even further. Inflation figures on Tuesday are expected to point to a continuing increase in the cost of living.

Rising food and energy costs are driving up inflation and could take the annual rate to over 3% later this year - well in excess of the 2% target set by the Government.

According to Trevor Williams, chief economist at Lloyds TSB, if inflation goes above 2.5%, Tesco is in real trouble.

One analyst claimed Tesco’s California-based Fresh & Easy convenience stores are missing sales targets by as much as 70%.

Tesco’s Fresh & Easy stores are about a quarter of the size of the traditional US supermarket. It is attempting to build on the success in the UK and Europe of its Tesco Express local stores.

However, Tesco said the claims were untrue and it was ‘completely bewildered’ by the note, which is utterly baseless.

Last week TNS, the market research group whose data is regarded as the gold standard by food retailers, released figures showing Tesco underperforming the wider grocery market and its market share slipping from 31.3% to 30.9% over the last 12 months.

Tesco is the biggest player in the British grocery market with a 30% share of the market. Asda controls 16.9% of the market, Sainsbury’s has 16.4% while Morrison’s is in fourth place with 11.5%.

Story link: Goldman Sachs urges investors to sell Tesco shares