Tesco Shares Lose on Amazon News

The FTSE 100 made a modest recovery on Friday, but still ended the week down slightly. While overall, the index broke its losing streak thanks to gains in oil and gas shares, those gains were offset by a fall in the grocery sector.

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shareprices.com - Sunday, June 18, 2017

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Tesco

Tesco in particular struggled. While the supermarket gained four percent just after trading opened, it shed those gains after the news broke that Amazon is looking to get into the grocery sector. Investors are concerned about the potential for profit growth in the supermarket sector. Price remains one of the only things that Tesco (and other companies in the sector) can compete on. The retailer has lost the price battle before, with companies such as Aldi and Lidl that are based in out of town areas able to compete viciously on price.

The news of Amazon’s plans pushed J Sainsbury down slightly too, and WM Morrison Supermarkets PLC also pared their rise to end the day up by 0.8 percent.

The pound has recovered to $1.2769, but this new found strength did not hamper the FTSE 100 as much as might have been expected. A stronger pound will often pressure shares, since many FTSE 100 companies take their earnings in dollars, and the exchange rate movements weaken their profit reports. This week, strength in specific sectors helped to reduce any movement that was purely currency based, however optimism was subdued as the Conservative party lost their parliamentary majority in the general election.

 

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