Broker snap: Evolution downgrades Tesco to reduce

6th Oct 2011 09:23

Evolution Securities has downgraded its rating for supermarket giant Tesco from neutral to reduce, saying it is concerned about falling UK trading margins in the second half.The group revealed on Wednesday that like-for-like (LFL) sales in the UK (excluding petrol) fell 0.6% while total sales rose 8.8% in the half year to the end of August.The broker thinks that Tesco is suffering from the impact of operational gearing on prolonged weak LFL sales."To reflect our concerns and our disappointment with Price Drop, we are cutting full year pre-tax profit by circa 5%, and moving to a reduce recommendation," the broker said.The target price is left at 350p.Shares were trading 0.25% higher at 394.25p by 09:23 on Thursday.BC