Sales growth worries take their toll at Tesco

That is the verdict of Société Gé*érale, which today said Tesco remains off its shopping list, with a price target of just 234p. In a note titled "It takes a while to think the unthinkable", published ahead of the supermarket chain's third-quarter figures on Tuesday, the City big gun predicts like-for-like sales growth in the UK of just 1.3%.

Analysts say the recently launched discount range will have eaten into growth and this, paired with the easing of price pressures in the food sector, raises the possibility of a sales drop in 2009.

SocGen's was the most bearish note, but other brokers were jumping on the bandwagon. Broker ING warned that shareholders should be braced for disappointing results. Its analysts still expect sales to rise 2.5% for the period, but this compares unfavourably with recent results from rival J Sainsbury, ¾p dearer at 286¾p, which reported a 4.3% jump in sales last month.

Tesco forecasts sales growth of 3.4% for 2009, but ING says this may prove over-optimistic given the weakness in the UK's non-food retail sector and the fact the company is losing market share. Reiterating a hold rating, ING puts a price target of 370p on the shares.

The negative broker sentiment, fuelled by later rumours of a possible profits warning, sent Tesco's shares plunging 10.3p to 291.3p, close to four-year lows.

The FTSE 100 yo-yoed between the red and the black in a directionless market, settling 18.39 points higher at 4244.49 in thin trading. A poor performance from the mining sector dragged on the benchmark index, as investors pocketed profits and chewed over the gloomy outlook for metal prices.

Miners accounted for the three biggest fallers in the top flight, with Lonmin diving 59½p to 853½p, Antofagasta 28p lower at 434p and Kazakhmys off 14¼p at 254¾p.

In New York after this afternoon, volumes were likewise light, with the markets only open for half a day. The Dow dipped 4.93 points to 8721.68.

Struggling housebuilder Taylor Wimpey was one of the Footsie 250's biggest winners, adding to yesterday's gains with a rise of 1p to 11p as over 58 million shares changed hands.

The Bryant Homes and George Wimpey owner, which is in survival talks with its bankers, was boosted by continued speculation about a debt-for-equity swap.

Its shares dived to a record low of 4¼p on Tuesday after its former biggest investor Axa sold the majority of its stake. Some dealers were quick to dismiss the gains, attributing it to a short squeeze.

News that BSkyB will carry on fighting a ruling that it must reduce its 17.9% stake in ITV explained the wildly contrasting fates of the two broadcasters.

BSkyB climbed 16¼p to 430½p in response, but renewed uncertainty over the holding left ITV among the biggest mid-tier losers, 1½p lower at 36¼p. Media analysts say that while the appeal is no surprise, if Sky emerges victorious, it could send ITV's shares plunging to fresh lows.

Yesterday, shares in the terrestrial broadcaster surged 18% after a leaked memo revealed plans to slash costs again, but brokers gave a lukewarm reception to the news. UBS said that despite factoring in the additional £30 million of cost savings, it still thinks the shares look overvalued, and gives ITV a target price of just 25p.

Investors may not want to step anywhere near Topps Tiles, with its shares losing over two-thirds of their value in the past six months, but one of its founders showed his faith in the tiles and flooring chain. Barry Bester bought 100,000 shares at 17p a pop, topping up his holding to 11.7% of the group and sending Topps surging 6¼p to 26¼p.