Goldman repeats 'sell' advice and cuts price target on Tesco

12th Jun 2014 13:23

Goldman Sachs has reiterated its 'sell' advice and slashed its price target on Tesco after a downbeat trading update from the troubled supermarket group last week.Goldman cut its target on Tesco to 250p from 270p following the retailer's first-quarter update, in which it said UK like-for-like sales excluding petrol fell 3.7%, worse than the 2.9% drop recorded in the fourth quarter, but not as bad as the 4% drop most analysts had expected.The sales figures were weaker than Goldman had envisaged and Chief Executive Philip Clarke's comments on emerging deflationary trends in the industry suggested this was likely to persist into the 2015 financial year, the broker said.Goldman said it continued to expect industry operating margins in the UK to continue their downward trajectory.The broker reduced its sales forecasts by about 5% on average for the next three years and cut its pre-tax earnings before interest and earnings per share estimates by about 3% and 4% respectively."We believe the deterioration in the trading performance makes deeper margin investment in the industry a more likely scenario, although the visibility of this remains low. We re-iterate our 'sell' rating on Tesco," Goldman said.Shares in Tesco fell 2.5p or 0.85% to 292.5p by 13:41 in London.PW