Tesco shares fell on Thursday after the supermarket said profits are likely to fall in the year ahead, despite enjoying strong growth over the past year.

The impact of increased competition will erode Tesco’s profits, which are now expected to decline as much as 10% in the current financial year.

Tesco shares were down 4% at the time of writing, which wouldn’t be considered that bad if the FTSE 100 wasn’t up 6%.

“Despite holding the largest share of the grocery market for over a decade, Tesco has issued guidance for lower profit next year than those just reported,” said Adam Vettese, market analyst at eToro.

“This reflects how seriously they are taking the threat of a supermarket price war following Asda’s move to sacrifice profits for a discounting campaign.”

Tesco released preliminary results for the financial year 2024/25 on Thursday, revealing adjusted operating profit surged 10.9% at constant rates to £3,128 million.

The retail giant’s robust performance was driven by volume growth and successful cost-saving initiatives across its markets.

The supermarket chain reported like-for-like sales growth of 3.1%. with the UK market driving 4.0%. Republic of Ireland operations delivered an even more impressive 4.6% growth, while Central Europe contributed 2.2% to the overall performance. Booker, however, experienced a slight decline of 1.8%, reflecting the ongoing downturn in the tobacco market and reduced volumes in Best Food Logistics, despite growth in its core retail and catering segments.

“Our investments over the last four years have resulted in the most competitive position and highest market share we have had for many years,” Tesco said in its report.

The company’s UK market share increased by 67 basis points year-on-year to 28.3%, marking 21 consecutive four-week periods of share gains and reaching its highest level since 2016.

Tesco’s core UK and Republic of Ireland operations saw adjusted operating profit climb 10.3% to £3,016 million, bolstered by strong volume performance and savings from the company’s “Save to Invest” programme.

Although Central Europe is still a small part of Tesco’s business, its proving to be a great source of growth with adjusted operating profit surging 28.9% to £112 million.

Tesco’s focus on its product range and customer experience is evident in the numbers. The company launched over 1,000 new products and improved more than 600 existing ones during the year, and sales of its premium ‘Finest’ range jumped 15% to £2.5 billion.

However, for all the progress it made in 2024/25, investors only really care about the future, and that doesn’t look so good.

Tesco pointed to increased competition and said it expects adjusted operating profit of between £2.7 billion and £3.0 billion this, down from the £3,128 million achieved in 2024/25.

This is a big disappointment, and Tesco shares sank as a result.

Donald Trump’s approach to tariffs has created an opening for investors to buy shares at knock-down prices.

The market is rife with dislocations and mispricing. Ask most seasoned investors, and they will say volatility creates opportunity.

Whether we’ve hit the bottom in equity indices such as the FTSE 100, S&P 500 and Dow Jones remains to be seen. That said, stocks are still on sale, and those with a long-term time horizon can pick up quality shares and equity vehicles at bargain basement prices.

We’ve picked out five shares to consider as the market recovers.

abrdn Equity Income Trust (LON:AEI)

abrdn Equity Income Trust is an AIC Dividend Hero having increased its dividend 24 years in a row. In times of uncertainty, it pays to have some stability in your portfolio, and this trust provides just that. 

Investment trusts have the ability to retain revenue for shareholder distributions in future years, and this mechanism allowed AEI to increase its dividend during the pandemic, even when many of its portfolio companies paused or cut dividends. 

The trust invests in high-quality UK equities with names such as Imperial Brands, M&G, Barclays, and Shell in the portfolio. 

Like many of its underlying investments, AEI’s share price has taken a hit since the announcement of Trump’s tariffs, providing the opportunity to buy into the trust and the relative safety of resilient UK bluechips.

With a yield in excess of 7% and the likelihood that the dividend increases again this year, AEI is a solid option for long-term investors seeking to take advantage of declines in high-quality UK shares.

Vietnam Holding (LON:VNH)

The selection of Vietnam Holding is a reiteration from our ‘Top 20 Stock Picks for 2025’ – many of which are looking a little sorry for themselves after Donald Trump’s tariff actions.

Vietnam was hit by one of the highest tariffs by Donald Trump, sending the Vietnam Ho Chi Minh Stock Index sharply lower in the following days.

Many of the world’s leading brands have established manufacturing facilities in the country, and the threat of a 46% tariff has raised serious questions about what the future holds for the operations of brands such as Nike, Adidas and Apple.

Vietnam was one of the first countries to get in touch with the US president after the announcement, and reports that the country was seeking a zero-tariff solution sparked a sharp, albeit short-lived, rally in global equities on the Friday following the announcement. Should a zero-tariff solution, or as close to zero as possible, be achieved, Vietnam may continue to hum along relatively unscathed.

The Vietnam Holding Investment Trust was inevitably hit by tariffs, but one could argue that the extent of the decline presents an opportunity for investors.

When we talk of dislocation of asset prices, VNH is a great example. Much of Vietnam Holding’s share price decline is the result of an expansion of the trust’s discount-to-NAV (now around 10%) as opposed to destruction of the portfolio’s value.

The VNH portfolio is heavily weighted towards technology companies and banks that are more exposed to the domestic market than overseas trade, especially trade with the US. Indeed, companies such as FPT, the trust’s largest holding, do a lot of business with Japan and very little direct business with the US.

Of course, a general slowdown in the Vietnamese economy will be unhelpful, but the VNH trust has little exposure to companies that will be directly impacted by tariffs.

The threat of tariffs could also prove to be beneficial to Vietnamese stocks. The country has been pursuing an emerging markets status and authorities are likely to expedite efforts to secure promotion from a frontier market that promises to open the doors to a wave of foreign capital into the equity market. Trump’s tariffs will have little impact on this.

VNH’s management is seeing the dip in shares as an opportunity and bought back 38,895 shares at 311p the day after Trump’s announcement.

Taylor Wimpey (LON:TW.)

Taylor Wimpey and the rest of the UK housebuilders may actually benefit from Donald Trump’s tariffs if they force the Bank of England’s hand on interest rate cuts.

While tariffs could lead to some job losses in the UK, any slowdown in the UK economy is likely to prompt a reaction from the BoE in the form of interest rate cuts. This would bolster demand for homes.

The extent of the UK’s job losses to a 10% tariff will likely be contained, avoiding any substantial economic downturn that would see a dramatic housing market slowdown.

Indeed, a slight slowdown in the UK housing market may be the catalyst we need for the UK government and BoE to act to spur demand for new build homes.

Cost inflation will be a concern in the new era of tariffs, but Taylor Wimpey’s supply chain is relatively straightforward, with materials and labour making up the large part of costs. Materials are likely to rise, while Labour costs will probably flatline and may even go down.

Taylor Wimpey trades at 12.5x historical earnings compared to 14.7x for Barratt Redrow and 12x for Persimmon. It isn’t the cheapest housebuilder on an earnings multiple basis but its dividend is very attractive.

The company has a policy of paying out 7.5% of its net assets per year, which translated to 9.46p last year – giving Taylor Wimpey a yield of around 8.9%.

Given the macro conditions, it’s likely Taylor Wimpey cuts its dividend this year. But even if it slashes it by 20%, it would still yield more than most FTSE 350 housebuilders. Last year, the dividend fell by just 5% despite profit for the year falling by 37%.

The underlying long-term structural demand for homes in the UK underpins Taylor Wimpey’s investment case.

GenIP (LON:GNIP)

Another reiteration from our ‘Top 20 Stock Picks for 2025’, GenIP is quietly delivering on its growth targets and the recent drop in AIM-listed shares across the board makes shares all the more attractive.

The AI analytics company has announced contract wins totalling over $400k so far this year and has said it’s actively engaged with potential new customers.

GenIP specialises in helping technology transfer offices accelerate the commercialisation of their technological discoveries and is winning news business in a diverse range of geographies.

Recent announcements reveal new clients in Singapore and Saudi Arabia, with marketing efforts ongoing in Asia and the Americas.

The company recently revealed results for its first year of incorporation, which included the listing of the firm’s shares on AIM. Costs relating to the IPO made up a large part of the cost base, resulting in a loss for the period. Stripping these out and making a rough projection of orders based on what they have recorded so far this year suggests they are heading for profitability later this year – no mean feat for an early-stage tech firm.

Antofagasta (LON:ANTO)

One of the higher beta FTSE 100 shares, copper miner Antofagasta took a beating in the days after the tariff announcement in line with a sharp sell-off in copper prices.

To consider Antofagasta, you have to take a glass half-full approach to the global economy and assume that, over time, demand for natural resources will follow long-term trends.

Antofagasta recently reported an increase in revenue and profits, which was helped by increased production and higher copper prices. Copper prices have clearly taken a hit, and if they remain at their current depressed levels, they will feed into ANTO’s profitability in the coming quarters.

However, investors must consider whether eradicating around a third of the group’s market value is overdone. Many metrics suggest it is.

The company is now trading at less than 5x 2024 EBITDA. EBITDA may fall if copper prices remain low, but not to the extent that would make ANTO look expensive compared to historical averages or some of its peers.

The business is highly cash-generative and ended 2024 with over $4bn in cash.

In addition to attractive valuation metrics and cash position, ANTO has expanded its EBITDA margin, and mining operation efficiency is improving.

Assura has agreed terms for a £1.6 billion takeover by US private equity group KKR after weeks of failed attempts by Primary Health Properties to acquire the healthcare property group.

Assura and KKR have agreed terms for a cash acquisition of Assura, which values Assura at 49.4 pence per share. Primary Health Properties latest offer valued Assura at just 46.2p.

KKR’s offer comprises 48.56 pence cash and a 0.84 pence dividend due in April.

The offer matches Assura’s EPRA NTA value of 49.4 pence per share and represents a premium of nearly 32% on Assura’s closing price before the offer period.

Primary Health Properties’ unwillingness to pay Assura’s EPRA NTA means yet another UK-listed company falls into the hands of a US private equity group.

The FTSE 100 sank again on Wednesday after Trump’s tariffs came into force overnight and the threat of a fresh wave of tariffs on pharmaceuticals weighed on London’s heavyweight pharma sector.

Yesterday’s rally in global equities proved to be shortly lived. Any hope around potential deals with around 70 countries that had approached the White House to negotiate was replaced by outright risk aversion on the introduction of 104% tariffs on China. 

China is not a country to be pushed around or dictated to, and Donald Trump’s demand for a phone call from the world’s second-largest country to negotiate tariffs was not met.

Indeed, China hit back with an additional 50% tariffs on US imports on Wednesday.

London’s China-exposed miners fell, adding to the downside pressure created by GSK and AstraZeneca.

Financial stress

There are growing signs of distress in financial markets. US government treasuries are selling off, the Yen is soaring against the dollar, and US swap rates are tumbling.

Donald Trump’s tariffs now have broader implications than just the erosion of company earnings. If these stresses are left unchecked, the bear market for US global equity indices could be the start of a broader sell-off. 

Many leading hedge fund managers are warning against buying the dip, while Goldman Sachs analysts suggest now is a good time to start venturing back into equities.

Equity bulls will hope there is an element of ‘sell the rumour, buy the fact’ to Trump’s tariffs and that investors fearing the consequences of the trade war have already dumped most of the stock they plan to. This could clear the decks for investors to dip their toes back into beaten-down names. 

“UK equities were historically cheap even before the sharp further drop of the last few days. The steep decline has only made them look even more attractive,” said Ben Ritchie, co-manager of Dunedin Income Growth Investment Trust.

“There are plenty of stocks on close to double digit dividend yields that we think are incredibly well underpinned, alongside a large number of companies trading on multiples that are lower than at the nadir of Covid-19 when we were unsure if the world could function.” 

However, significant unknowns remain, and Trump’s erratic approach to foreign and economic policy shows no sign of abating.

Interestingly, there are signs of tensions in Trump’s top team, with Elon Musk, in a social media post, saying Trump advisor Peter Navarro was ‘dumber than a sack of bricks’.

Tesla’s shares are among the worst-affected US technology companies, having lost 41% this year, taking an axe to Musk’s net worth.

In addition to another 4.9% drop in Tesla shares, other US technology shares suffered further losses overnight as Trump appeared unwavering in his pursuit of a global trade war. 

FTSE 100 tumbles

The S&P 500 closed down 1.4% overnight after trading as much as 4% higher. The sharp turnaround in US stocks led to a softer European open, which saw the FTSE 100 fall over 2% in early trade.

Nervousness about the standoff between Trump and China played out in the FTSE 100’s natural resources stocks. Anglo American sank over 5%, and BP lost another 3%. China is the world’s largest consumer of natural resources, and a slowdown in its economy will have deep implications for the sector.

However, Gold was back in vogue after a retreat from recent highs. Precious metals miner Endeavour Mining caught the attention of investors, sending shares 2% higher. Endeavour was one of the very few gainers in the early stages of Wednesday’s session. 

“As the world waits to find out which side might blink first, there’s renewed sentiment for gold as place of safety amid market turmoil, with the precious metal climbing back up after recent losses,” said Susannah Streeter, head of money and markets, Hargreaves Lansdown.

AstraZeneca was the FTSE 100’s top faller, sinking 6%, after Trump threatened to impose tariffs on pharmaceutical imports. AstraZeneca is the FTSE 100’s largest company by market cap and wiped a significant number of points off the index.

The FTSE 100 jumped on Tuesday, with European equities on track to record their first positive session since Trump unleashed his tariff charts on the world last week.

However, Tuesday’s gains did little to make a dent in the losses sustained since Trump’s announcement, and the FTSE 100 is still around 9% lower than where it was pre-tariff announcement.

The gains follow signs in a softening in the White House’s stance on tariffs and, importantly, the willingness to negotiate. Early signs of the potential for deals yesterday caused wild swings in US stocks that created and then wiped out trillions of dollars of value within seconds.

Two reports in close proximity saw the S&P 500 rally around 250 points – around 5% of the total index and $2 trillion in market value – in a matter of minutes, only for it all to disappear again just as quickly.

Reports that Trump was considering a delay to tariffs and suggestions the EU was happy to look at zero-tariff options sparked a rally of around 300 points that lasted no more than 10 minutes before the index gave back most of the gains. 

The White House labelled reports that Donald Trump was considering 90 tariff delays as ‘fake news’, squashing hopes that a deal could be struck between major economies and the US, erasing all of the short-term gains. Rarely in history has such a large amount of equity value been created and destroyed so quickly.

However,  a trickle of media commentary and White House statements suggesting that the US administration was in dialogue with around 70 countries helped support US stocks throughout the session, and the S&P 500 very nearly closed in positive territory overnight.

There were also a number of positive signals coming from the US on the corporate front, including Broadcom announcing a $10bn share buyback. The company’s AI revenues have surged recently, and its announcement served as a gentle reminder of the underlying strength in some of the world’s largest companies.

The step back from the abyss was taken positively by European stocks, which opened higher and continued to rally as the session progressed.

“After multiple punishing sessions, stock markets appear to have started their road to recovery,” said Russ Mould, investment director at AJ Bell. 

“Asia led the way, including a 6% advance from the Nikkei after Japan effectively jumped to the front of the queue for tariff negotiations with Donald Trump. Reports that Japan would get priority status for talks fired up markets in hope of a resolution.

“Trump has the same end-goal for the countries on which he has imposed new tariffs. He wants to make it easier for US companies to do business overseas, for the partnering countries to buy more US goods, and for the US to get its hands on strategically important assets such as natural resources.”

Those stocks most heavily hit by Trump’s tariffs were among the FTSE 100’s top risers on Tuesday. Rolls Royce added 5% while Babcock International gained 4.5%.

Miners helped the index higher with Glencore rising 3%.

There were also more gains for Marks & Spencer and Unite Group – two of only five FTSE 100 shares that are higher than were they were just before Trump’s announcement.