UK retail stocks are doing well, with the biggest ones trading at a multi-year high. Tesco (TSCO) share price soared to a record high of 316p on Friday, rising by almost 20% from its lowest point this year and 74% from its 2022 low.

Sainsbury stock has risen to 270p, and is about 30 pence below its all-time high while Marks & Spencer (MKS) is hovering near its all-time high. Across the pond, other retail companies like Walmart and Costco are sitting near its record high.

Tesco’s macro backdrop

Tesco, the biggest British retailer, has done well in the past few years as the British economy shows signs of stability. Data released on Thursday revealed that the UK GDP rose from 0.0% in April to 0.4% in May. It expanded by 1.4% from the same period in 2023.

These numbers mean that the country is doing modestly well and is beating the consensus estimate. As the biggest retailer in the country, Tesco does good when the economy is thriving since consumer spending is a major part of the GDP.

Tesco is also benefiting from the ongoing inflation trends. The recent data showed that the UK inflation dropped to 2.0% in May and the downtrend could continue. Retailers benefit from low inflation because it increases consumer spending. 

Low inflation also mean that the country’s central bank has higher chance of cutting interest rates. Economists believe that the bank could slash these rates in the upcoming meeting on August 1st. 

Turnaround is continuing

Tesco is also doing some positive moves internally that are contributing to this performance. Earlier this year, the company received £700 million from Barclays as it sold its banking division. 

This was a good move because it left a leaner company that focuses on retail and wholesale business, Booker. It also benefited investors who received the bulk of these funds through dividends. Tesco is also buying back loads of its stock. It started buying back shares worth £450 million.

The company, which controls 27.6% of the UK grocery market, is also gaining market share across other sectors. In its most recent results, Tesc said that its market share expanded to 27.6%, the 15 consecutive month of gains. Its food sales rose by 5% during the quarter. 

The results showed that Tesco’s sales in the first quarter rose by 3.4% to over £15.3 billion. Its UK revenue rose by 4.6% while its ROI segment rose by 4.4%. Booker was its worst-performing business as its revenue fell by 1.3%.

Analysts and the management believe that Tesco will continue its steady growth in the coming years.

Tesco stock is still undervalued despite the recent share price growth. Data by Finbox shows that the company has a P/E ratio of 12.2, which is lower than the FTSE 100 index average of 15. It is also cheaper than other global peers like Walmart and Costco. 

Tesco share price analysis

(Click on image to enlarge)

TSCO chart by TradingView

The weekly chart shows that the TSCO stock price has been in a strong bull run this year. Most recently, the stock has formed an ascending channel shown in green. It has remained above the 50-week and 100-week moving averages.

The stock is nearing the upper side of the channel. Also, the MACD indicator has remained above the neutral point while the Relative Strength Index (RSI) has moved to the overbought point.

Therefore, the stock will likely continue rising in the coming months. If this happens, the next point to watch will be 350p. This view will be confirmed when the stock moves above the upper side of the channel.

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