Tesco warning leads to £1bn supermarket share sell-off across Ocado, Sainsbury’s and M&S

Tesco’s profit warning has resulted in a £1 billion supermarket share sell-off with yesterday’s FTSE 100 closing figures showing that market value had been stripped from Sainsbury’s, Marks & Spencer and Ocado.

All supermarket groups listed on the London stock exchange reported a total of just over £1 billion wiped off their market value yesterday, following Tesco’s warning that the cost-of-living crisis was expected to wipe up to £250 million off its profits this year.

Of the grocers to suffer from the news yesterday, Ocado was hit the hardest across the FTSE 100 with its closing shares down by 31p – 2.6% – to £11.54.

Sainsbury’s was down 6p, or 2.5%, at 238½p, while M&S shares dropped by 3¼p, 2.1%, to 150p. Tesco shares were also down as the markets closed, down by 5½p – or 2% –  265¼p.

The news comes just one week after Morrisons – currently owned by private equity company Clayton, Dubilier & Rice – also warned that its sales and profits would be affected by rising inflation and the ongoing effects of the war in Ukraine.

Read more: Tesco to pay workers almost £50m as “thank you” bonus 

As Britain’s largest supermarket chain and biggest private sector employer, Tesco warned yesterday that rising wage, energy and distribution costs alongside a slowdown in consumer spending is likely to cause profits to fall this year.

Adjusted operating profit for 2022 was expected to be between £2.4 billion and £2.6 billion this year, compared with the original forecast of £2.6 billion – a drop of £250 million.

The grocery giant saw pre-tax profits triple to £2.03 billion, up from £636m the previous year, thanks to rising sales and lower pandemic-related costs – which fell to £220m, down from £892 million the previous year.

Tesco chief executive Ken Murphy said the supermarket remained “laser-focused” on keeping costs low as it invests in keeping prices low to ensure it remains competitive against discount grocers Aldi and Lidl.

Shore Capital retail analyst Clive Black downgraded his recommendation for Tesco from ‘buy’ to ‘hold’, adding that if the supermarket catches a cold he would expect others to catch ‘influenza’.

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