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Tesco checks its receipts
Tesco PLC (LON:TSCO) is scheduled to release its finals on Wednesday.
The grocer has been one of the few companies seeing improvement amid the coronavirus crisis, as consumers have been stocking up their cupboards and given up on dinners out.
Analysts at AJ Bell said that the panic buying gave Tesco some respite from the war with Aldi and Lidl, while its share price has “only” dropped 16% in the past month, against the wider FTSE 100 index tanking 28%.
Analysts also pointed out that the acquisition of wholesaler Booker in 2017 is helping sales and earnings momentum at the group.
Investors will want to see whether the firm is on track to meet the goals of generating synergies of £140mln by January 2020 and £210mln by next year.
What’s more, its Thai and Malaysian operations are going to be sold for £8bn, helping to erase the pension deficit and fund a £5bn special dividend - amounting to 51p per share.
In the results, the market will be interested in like-for-like sales growth, which have been pressured by discounters.
However, pre-tax profit is expected to rise to £1.9bn against last year’s £1.5bn, while dividend should come in at 8.27p per share up from 5.77p a year ago.
When it comes to forecasts, consensus full-year pre-tax profit its now £2.3bn for a 10% increase in the ordinary dividend to 9.13p per share.
https://www.proactiveinvestors.co.uk/companies/news/916601/tesco-and-asos-to-report-results-next-week-as-both-grapple-with-coronavirus-fallout-916601.html
LOL not forgetting DougB
AST is now my entertainment board. That was a good trading share but heck if I know what is going on there nowadays. I keep wanting to go back in again but I know I would lose. If ever there was a case of better the devil you know, bring back CH and his spreadsheets. That share was sooooooo predictable.
Hard one to call Nelly, everyone else seems to be dropping them like hot rocks.
On a lighter note, this reminds me of years ago on ast, Rosewall, Nelly, just need to see whitty make an appearance ;)
It will be interesting to see regarding the dividend, but don’t see that the supermarkets will be affected the same was as banks and oil companies.
If they carry on with the dividends it may be one of the few sectors that do, making them more attractive
I hope so Nelly.
If the Q1 sales are outstanding then the following may be subdued as the advanced purchases become delayed consumption. But, I don't give a monkey's whatsits as to the sales (vanity), I want to know the profit (sanity) and whether the special dividend really will go ahead or will it be pared back to shore up the business.
I can understand some of your comments Rosewall, but you have to also take into account things like;
Mother’s Day - restaurant and pubs closed meant people staying at home to eat
School dinners - these meals have to be now added on to the weekly food bill
Pubs closed - additional home drinking
Restaurants closed - what percentage of meals were eaten out, now consumed at home
Up coming Easter period - again a lot of people dine out, now likely to buy more premium meals from supermarkets
Clothing shops shut - supermarkets still able to sell clothing, although demand may be weaker
There may be supply issues and some increase in costs, but I would think that increased taking will more than cover this.
I guess we will find out next week when the figures are released.
All I can see is Q1 sales are going to be outstanding compared to the same period last year.
KIS1
Yes, it does depend on what you see. It depends on whether you are on the ground or are you looking from afar through rose tinted specs. Both views are valid.
Yes, the low margin, loss leading products were certainly cleared off the shelves. The more expensive products, especially bottled beers remained on the shelves. And remember, many of the items that were cleared would have been bought by cafe, restaurant and nightclub businesses who will often get their alcohol from Tesco (especially high cost spirits which are sitting on the shelves still). How much of the stock is additional purchases and how long it will take people to get through it before having to go back into store for a top up remains to be seen.
Rosewall, Just like yourself, I also go by "what I see before me" , and what I currently see is a massive increase in Tesco business volume due to this surreal environment which may still go on for sometime, I guess we'll find out more details on Wednesday. GLA
The sku mix & margins are also relevant.
"So-called stockpiling of necessities occurred in the first two weeks of the four-week period. In the last week, attention turned to frozen food, sales of which surged by 84% against the same week a year earlier, and alcohol, with sales of beer, wine and spirits spiking 67%."
GL
Oh yes, delivery saver customers, when they can get a slot, will continue to benefit from the service but they won't be charged for it. Indeed, the company will be refunding half of March's payment.
I believe that with Tesco update/results now due on Wednesday, we'll see an uptick on the SP starting early next week with this gaining significant momentum to the upside from Wednesday onward IMO.
Got to admit, I’m surprised at the level this is currently trading at. I would of thought in this climate it would be one of the stocks trading far higher, may have to consider topping up if it goes much lower.
"Tesco will remain extremely busy and also hope that the now much improved/more efficient Tesco will benefit all customers & shareholders going forward."
Unfortunately, the reality is very different. I see it day in and day out. Lots of activity but very little stock (better now but at what price increases for non contractual goods). Hugely higher costs. 15% staff discount, 10% increase in wages for doing the same job, vans going out 3/4 full due to lack of stock, lots of new costly bodies and vans (how many will be needed afterwards). And how can you be more efficient when some stores are 20+ drivers down. I won't even go down the route of how many cancelled orders. I may be totally wrong but I make my investment judgement on what I see before me.
New / repeat subject:
The SP is rapidly approaching my buy price again.
Thanks to all regarding responses on the possible 5 meter social distancing. Yes agree it should have negleagible effect on Tesco business. Especially since
A/. We are extreemly precise and good at queing.
B/. Large % of customers have nothing but time on their hands anyway.
As per Bloomberg: "Walmart has put the sale of a majority stake in its U.K. grocery chain Asda on hold to focus management’s attention on running the business amid unprecedented spikes in demand driven by the coronavirus" which needless to say, one can also assume that due to this "unprecedented spikes in demand", Tesco will remain extremely busy and also hope that the now much improved/more efficient Tesco will benefit all customers & shareholders going forward.
Agree SBP, potential bookings far exceeds current capacity and delivery demand exceeds current supply. Diversifying supply through local distribution, for example Milk delivery could be one possible solution. My milkman delivers a wide range of skus beyond milk but almost all are permanently out of stock online, just like TSCO delivery slots.
Massive Q-1 sales result surely but how will they fill ongoing demand during lockdown?
It is looking like the Home Delivery Service has maxed out and no new customers are being registered. The CEO is saying if you are not vulnerable, come to the store, take pressure off home delivery.
My local supermarkets are quiet and fully stocked and everyone is keeping their distance, but it is a rural area.
I would imagine they will follow any guidelines/recommendations made by the government. if it changes to 5m, they will just reduce the amount of people aloud in the store at one time.
This will obviously lead to longer ques, but ultimately people still need food.
At the same time they will increase the home delivery network/capacity.
Extract of WHO Report Feb 2020.........
COVID-19 is transmitted via droplets and fomites during close unprotected contact between
an infector and infectee. Airborne spread has not been reported for COVID-19 and it is not
believed to be a major driver of transmission based on available evidence; however, it can
be envisaged if certain aerosol-generating procedures are conducted in health care facilities.
Fecal shedding has been demonstrated from some patients, and viable virus has been
identified in a limited number of case reports. However, the fecal-oral route does not
appear to be a driver of COVID-19 transmission; its role and significance for COVID-19
remains to be determined.