Shares in Tesco dropped 13p to 313.5p yesterday after the retail giant warned the City that higher costs, especially related to an increase in oil prices, were a cause for concern.
Despite revealing an 18.7% rise in pre-tax profits to £908m in half-year results, analysts and investors were wary that Tesco, which had previously been immune to high street gloom, had seen significant external cost increases, mainly from higher oil-related costs and above-inflation increases in business rates.
Andrew Fowler, an analyst from Merrill Lynch, said: “It should all come as no surprise given the news flow from the general retail sector but it somehow feels worse coming from Tesco, hitherto immune.”
Jonathan Pritchard, an analyst from Oriel Securities, added: “All the body language was cautious. We see pressure on food retail profit and loss from all angles: slowing sales, falling gross margins and rising cost ratios - and Tesco is not immune.
Other food retailers were affected by Tesco’s results, with shares in Sainsbury slipping 3% to 275.5p, and shares in Morrisons dropping 2% to 178p.
Tesco said that group sales were up 14.1% from £16.5bn last year to £18.8bn this year, UK like-for-like sales increased 8.2%, or 6.7% excluding petrol, while UK sales rose 11.1% from £13.1bn last year to £14.6bn.
Despite revealing an 18.7% rise in pre-tax profits to £908m in half-year results, analysts and investors were wary that Tesco, which had previously been immune to high street gloom, had seen significant external cost increases, mainly from higher oil-related costs and above-inflation increases in business rates.
Andrew Fowler, an analyst from Merrill Lynch, said: “It should all come as no surprise given the news flow from the general retail sector but it somehow feels worse coming from Tesco, hitherto immune.”
Jonathan Pritchard, an analyst from Oriel Securities, added: “All the body language was cautious. We see pressure on food retail profit and loss from all angles: slowing sales, falling gross margins and rising cost ratios - and Tesco is not immune.
Other food retailers were affected by Tesco’s results, with shares in Sainsbury slipping 3% to 275.5p, and shares in Morrisons dropping 2% to 178p.
Tesco said that group sales were up 14.1% from £16.5bn last year to £18.8bn this year, UK like-for-like sales increased 8.2%, or 6.7% excluding petrol, while UK sales rose 11.1% from £13.1bn last year to £14.6bn.
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