Will Tesco shares plunge in May or June?Tesco PLCLSE_DLY:TSCOKalaGhaziFood retailers such as Tesco have traditionally been viewed as safe, defensive investments. They tend to attract beginner investors as well as those looking for stability, largely because demand for groceries remains relatively consistent regardless of economic or geopolitical turmoil. After all, food is a basic necessity, so revenues and profits in this sector have historically proven more resilient during periods of uncertainty. However, that long-standing assumption may now be facing a serious challenge. Recent findings from the consumer group Which? suggest that pressure on UK supermarket chains is intensifying, raising concerns about whether these businesses can maintain their defensive reputation in the current climate. In my view, Tesco’s share price could be at risk of a notable downturn. There are several warning signs that investors should not ignore. What’s driving concern? According to Which?, consumer sentiment in the UK was already weak even before the recent escalation in geopolitical tensions in the Middle East. Since then, confidence has deteriorated further. Their mid-April survey revealed that expectations for the UK economy dropped sharply to -62 — the lowest level recorded since the peak of the cost-of-living crisis. The outlook among consumers is overwhelmingly pessimistic. Only 9% of respondents believe economic conditions will improve over the next year, while a striking 71% expect things to get worse. This kind of sentiment typically has direct consequences for spending behaviour, especially in retail. Impact on shopping habits The data shows that consumers are already adjusting how they shop and eat. More than two-thirds of UK adults reported making at least one change to their habits in the past month. These adjustments include: Opting for cheaper alternatives (43%) Switching to supermarket own-brand budget ranges (37%) Taking advantage of promotional deals more frequently (31%) More concerning still, financial strain is beginning to affect basic consumption. Around 15% of households said they had gone without certain food items, and one in ten reported skipping meals altogether. This signals a deeper level of economic stress that could significantly impact supermarket revenues. What this means for Tesco While Tesco may be better positioned than many competitors due to its scale, supplier relationships, and strong brand recognition, it is not immune to these pressures. Its size allows it to negotiate lower costs and offer competitive pricing, while its Clubcard loyalty programme gives it a valuable data advantage to target promotions effectively. Even so, the challenges are mounting. With profit margins already thin — around 4.3% last year — Tesco has limited ability to offset rising costs by increasing prices. At the same time, increased consumer frugality could weigh heavily on sales volumes. Another area of concern is Tesco’s non-food segment. General merchandise accounts for roughly 5% to 10% of its revenue. If consumers are cutting back on essential grocery spending, discretionary purchases in this category could see an even sharper decline. Could the share price fall? The broader geopolitical situation adds another layer of risk. If global tensions persist or escalate, the economic fallout could further weaken consumer spending power, intensifying pressure on supermarket earnings. At the same time, Tesco’s valuation appears stretched. Its share price has risen around 30% over the past year, pushing its forward price-to-earnings ratio to approximately 18.9 — significantly above its historical average range of 12 to 13. This suggests that a lot of optimism may already be priced in. If upcoming updates fail to meet expectations, the downside could be significant. Tesco’s next trading update, scheduled for 18 June, will be a key moment. Any disappointing figures or cautious guidance could trigger a sell-off. Moreover, the shares could start to decline even before then if economic data continues to weaken or consumer confidence deteriorates further. Bottom line While Tesco remains a fundamentally strong business, the combination of worsening consumer sentiment, constrained margins, and elevated valuation creates a potentially fragile setup. Investors should be aware that even traditionally defensive stocks are not immune to sustained economic pressure — and in this case, the risk of a correction is becoming increasingly difficult to ignore.