Tesco was originally founded in 1919 and is now the UK's largest non-food retailer. It is operating in 14 markets across Europe, Asia and North America. It has many outlets including 'Extra', 'Superstores', 'Metro', 'Express' and 'Homeplus'.
thanks for your detailed comments and thoughts! interesting. Its a very good long term and at this price with dividends although. i might be cautious and get in when tapering starts?..Generally Tesco have done very well until this period and i just assumed artificial inflation was something to do with it..
I do much prefer the balanced HL article. http://www.hl.co.uk/ajax/silverpop/share-research-redirect/redirect?sedol=0884709&tab=security_research Tesco should still be a good long term hold with good dividend returns. Those of us who are cuttingly holding are likely to see a sharp drop with people jumping ship though, all of the speculation in the media that they are failing is bad news for the short term SP.
Terrible Publicity in Money Morning
Tesco wants to have its cake and eat it When Tesco’s boss, Philip Clarke, spoke to the press this week, he made it clear that he wanted to maintain the company’s operating profit margin somewhere around its current level of 5.2%. He rejected any suggestion of cutting that margin to 3% and launching a price war. But I don’t think that’s going to work. I can see why Clarke doesn’t want to cut margins. But if he doesn’t, it merely leaves Tesco increasingly vulnerable to competition from low-price rivals. The latest market share figures from Kantar Worldpanel show that the leading discounters Aldi and Lidl are growing fast. Aldi’s market share has soared from 3% to 3.9%. Both chains are aggressively opening new stores. Meanwhile, at the posh end of the market – which Tesco has no real foothold in - Waitrose continues to grow its market share. The rise of the discounters is a huge problem for Tesco. I don’t believe that a store modernisation programme on its own is enough to deal with this challenge. After all, Tesco launched its £1bn modernisation programme a year ago, yet it still reported a 1.5% fall in UK like-for-like sales this week. In other words, if you exclude recent store openings, UK sales are falling. Tesco is doing some things right in the UK. It’s slowing down the rate at which it is opening new hypermarkets. Amid competition from the internet, it is also trying to give people other reasons to go to its existing hypermarkets, by offering nice restaurants, yoga classes and other attractions. The launch of Tesco’s iPad knock-off, the ‘Hudl’, has also been a big success, selling 300,000 units so far. And continuing to open more high-street ‘Express’ stores is another good move – like-for-like sales are rising in this part of the business. But these positive moves aren’t enough. The essential problem is that Tesco believes it can maintain its current margins whilst growing sales at the same time. That’s not going to happen. As JP Morgan Cazenove recently pointed out, UK supermarket margins are higher than in other Western European countries such as France and Spain. That can’t last - as Aldi and Lidl grow, Tesco will have to accept that the UK market has changed. To maintain sales, margins will have to fall and that will hit profits. Permanently. And if profits aren’t going to rise for some time, then the current share price isn’t cheap, regardless of the seemingly low p/e. Forget the overseas branches – Tesco’s story is all about the UK Tesco backers might argue that Tesco’s overseas operations in Asia and Eastern Europe are a promising source of future growth. Indeed, these overseas businesses were a big part of the bull case for Tesco a few years ago. Back then, bulls would point out that Tesco was generating huge amounts of cash in the UK and
A good balanced article on Hargreaves Lansdown regarding the remodelling of Tesco. It accurately lists out the positives and negatives and points out that even with the SP in the doldrums at the moment the dividend is a comforting factor. The overall position was that things are beginning to turn around and that the sentiment towards this company will come back.
Yes you are correct, artificial / actual inflation being created . In the long run it's the only way they know how to balance the books. It's an easy way! We did it in the 80's with mortgage /house price inflation/ inflation, borrow at today's pice and pay back the same capital sum but with the inflated pound! It's a shame when fiscal policy is overshadowed by politics - but it can't be any different as most voters cant see further than the end of their little noses and the politicians want re-election and the alternative for the Uk would be dire, Ed M would just open the drawers and let the undeserved help themselves. While I am at it I feel the China link / funding is difficult to come to terms with and who wants the HS2 anyway! As for Tesco, a good long term buy? Who knows, but I guess so! As ever DYOR and good luck. I think this goes under the off topic heading!!
I assume there is a lot of institution money in this share. -Note the brokers recommendations today trying to support the price and settle the market- Do not be fooled.There is a major realignment taking place in the grocery business and Tesco is caught right in the middle.One poster says "tesco is still a money making machine……………"I say get in your car and go and look at your localTesco and the local competition. The strengthening realignment is no place for the private investor in my opinion.Todays broker recommendations reinforce my view. Sell Sell Sell
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