Sector movers: Supermarket stocks side-swiped as Tesco reports £6.4bn loss

LONDON (ShareCast) - The swift realisation that a £6.4bn annual loss was not something to be taken lightly saw Tesco (Xetra: 852647 - news) 's share price drop into the red by Wednesday afternoon, sending the UK food and drug retail sector to the bottom of the pile. The worst loss in the Tesco's 97-year history was initially warmly welcomed by the market, as some expressed optimism that the results would draw a line under the sand following a tough year for the supermarket.

Analysts suggested either a bear-squeeze of previous short trades or a genuine appreciation by investors of chief executive Dave Lewis's kitchen-sinking transparency and plan to clean up the balance sheet and turn things around.

After rising as much as 2.4% early on, however, the stock had quickly plunged into negative territory and was trading down 4.5% at 224.1p by 15:10.

The results took out grocery rivals Sainsbury's and Morrisons too, who were both nursing losses of 3.5% in afternoon trade. Online food retailer Ocado fell 1.6%.

"The initial flurry of hopeful, Dave Lewis-liking Tesco investors have gradually disappeared as the morning continued, with the supermarket giant finally beginning to tip into the red in the manner its UK pre-tax record breaking losses would suggest it deserves," said Spreadex analyst Connor Campbell.

The grocer unveiled sales down 3% to £69.7bn in the year to 28 February, with the previous year's profit swinging to the huge loss before tax of £6.4bn, much worse than the £4.5bn-£5bn expected.

"To say that Tesco had a nightmare year in FY2015 would be an understatement, an out-turn that would simply have been unfathomable in days gone by," Shore Capital's Clive Black and Darren Shirley said.

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