Tesco shares hammered

IronWolf

gadgetmind wrote: »

Dividends covered twice over, so I agree, but compare and contrast with Ocado's performance today. I'm sure Tesco will have to react.

I researched Ocado a few months ago, and wasn't really impressed. Their strategy was essentially based around using lost cost warehouses rather than retail stores to cut costs. But the supermarket players have more than enough money to invest in these things themselves. Ocado have already run into trouble with this system as well. They also make no mention of using this strategy to compete on price, just to improve service. I've never had a problem with normal supermarkets delivering.

gadgetmind

IronWolf wrote: »

I researched Ocado a few months ago, and wasn't really impressed.

I also looked at and rejected their shares, but they are up 30% today while TSCO is down 15%.

It's because I though the big boys (or even Waitrose) could eat their lunch that I held off, but it's clear that customers are increasingly wanting food delivered than to launch a major expedition to an out-of-town shed.

IronWolf

Ye, but remember the big boys could buy just buy them out if it was such a good business. £400m is loose change to Tesco.

gadgetmind

IronWolf wrote: »

Ye, but remember the big boys could buy just buy them out if it was such a good business. £400m is loose change to Tesco.

True enough, and I guess the customer base, systems, and time-to-market would make it worth a premium.

cmorgan091

I am also a shareholder in Tesco. Yes I think they have been oversold today and I also took the opportunity to buy at a good price (326p = P/E 9.8 on last years earnings).

I am investing for the long term future and feel Tesco are well diversified and offer good growth opportunities in the future, not to mention a healthy dividend. Mr Market hates them today which for me is the best time to buy.

OP - Yes I think you did the right thing if you are investing for the long term.

Chris

BLB53

They will be good for the dividend at the lower price, yield now around 4.7%.
Big question mark about the new ceo, Clarke and whether he can fill Sir Terry's boots. I have my doubts and until this issue becomes clearer, I don't see any upside in the SP.

IronWolf

Some quick facts for info:

UK sales (excluding Tesco bank) accounts for 66% of revenue.
Percentage of profit is lower however due to the higher margins at Tesco Bank, slightly offset by the loss making US adventure

Profit margin is 6%, compared to Sainsburies ~ 3.5%. That may explain why people describe the experience in Tesco as inferior to other supermarkets, they spend less on the experience and squeeze every penny from the customer. But from an investors point of view, it's not necessarily bad, as you're making almost twice as much money from the same sales.

Tesco Value and Tesco Finest where (individually) the first and second biggest selling brands in the UK (last time I checked). That means even bigger than Coca Cola. One of the strengths of supermarkets in general is that they are the point of contact with consumers, and all have increasingly been selling private label brands as consumers look for cheaper alternatives to brands. We can see that apart from the super brands like Coca Cola, a lot of companies are struggling with this competition. This trend will continue, as consumers realise that premium products do not mean premium quality, and supermarkets are increasingly providing their own premium range for most products. That means better profit margins for them.

So while competition between supermarkets is fierce and Tesco may struggle with this, I think as a sector it will continue to get stronger and Tesco will benefit from that.

moneylover

Investors Chronicle has done an article today but I cant read it as although I buy the paper copy most Fridays I dont have an online subscription and there won't be anything in tomorrows copy anyway as beyond their print deadline. Does anyone know whether they recommended buying or not? Am NOT asking for a copy and paste illicit job just whether the view was to buy?

ses6jwg

Me and my grandad were discussing whether to buy Greggs or Tesco about 4 months ago.


I thought Greggs was a better bet. He thought Tesco.

He thought wrong.

atush

Try the Motley Fool website?

Or any of the finance websites that track news like Yahoo finiance as the gist will be in the title of the article (which they show).