Tesco Shares vs announcement of £5bn loss

KGriff

Reading through the preliminary notice, it is clear that Tesco is not doing too well exporting its brand name abroad. Unlike Aldi for example over here who have taken a big chunk of market share.

Aldi's success is so evident, that each Saturday, our local store feels like you are shopping amongst the crowds in a Christmas spree. The store and car park are now too small to cope with the demand.

I reckon if they fail to expand the store, people will pay extra and go somewhere else, just to avoid the queues at the till.

I reckon the grocery business requires a careful rethink. There is a lot of strategic thinking and planning required by all the major supermarkets and they need to get the balance right to find sustainable long term success.

It appears from the preliminary report that the Tesco board have taken their eye off the ball, during what can only be described as a tumultuous year, involving overstating profits that has lead to the SFO investigation and many other things besides.

IronWolf

bowlhead99 wrote: »

The trading profit is what they had from trading, before they had a bunch of other non trading or non normal items which got them down to the overall big negative number on a "statutory" (i.e.what the law says you have to declare as your result) basis, 6.376 billion. This includes write downs on businesses and properties that have to be "impaired" down to a lower carrying value than they had before, under the accounting rules.

Problem is Tesco have had an awful lot of these 'non-trading' losses over the last few years. Not much point making trading profit if you lose it all on stupid ventures to the USA etc.

JohnRo

They and their share holders are paying the price for over extending in a failed attempt at world domination in what seemed like, a few years ago, all areas.

I shop at Tesco personally and think they're ok, really good range of products and regularly save 10% and more using clubcard vouchers and selective special offers.

edinburgher

Aldi's success is so evident, that each Saturday, our local store feels like you are shopping amongst the crowds in a Christmas spree. The store and car park are now too small to cope with the demand.

Our local Lidl is a bit like that - go any later than 11:00 a.m. at a weekend and you are faced by hordes of weekend shoppers (like weekend drivers, only slower)!

bowlhead99

KGriff wrote: »

It appears from the preliminary report that the Tesco board have taken their eye off the ball, during what can only be described as a tumultuous year, involving overstating profits that has lead to the SFO investigation and many other things besides.

I don't think there are real indications that they have "taken their eye off the ball during... this year".

The overstating of profits was something that was fixed during the current year by changing a prior year accounting practice, which is why they have an exceptional item for the element of earnings impact which related to prior years. And if they are writing down some of their assets for impairments, it might need to be something that had to be done, but it is not an indicator that their eye was off the ball for the last twelve months.

It was clear six months ago (when the share price dropped to 180p from 300p last April) that the business was suffering because it was badly positioned (which is why the share price is not where it was back in 2007 and 2010/11). They have some new management and a new business plan which is being put into place. I think what you mean is they had taken their eye off the ball in previous years, rather than the current one?

takethatthen

I predicted Tesco, which is an evil force in society, would crash and burn two years ago, and it seem to be happening, companies like this and Apple seem to think they are immune to there corruption.

veryintrigued

takethatthen wrote: »

I predicted Tesco, which is an evil force in society, would crash and burn two years ago, and it seem to be happening, companies like this and Apple seem to think they are immune to there corruption.

Whilst I dont defend some of their practices I'd say that was hugely OTT.

If you've read the figures they still made 1.4billion in group trading profit and is still employ half a million people (like you and I) around the world.

The stockmarket doesnt seem too perturbed by this either. (awaits 'it was already built in' mantra from someone) which is probably good news for millions of those who pay into pensions that hold this stock.

Edit - I see the shares have now lost 1% after being 1% higher since my post!! Anti midas touch me!

KGriff

bowlhead99 wrote: »

It was clear six months ago (when the share price dropped to 180p from 300p last April) that the business was suffering because it was badly positioned (which is why the share price is not where it was back in 2007 and 2010/11). They have some new management and a new business plan which is being put into place. I think what you mean is they had taken their eye off the ball in previous years, rather than the current one?

It's hard to blame Dave Lewis and the new board, but clearly the main focus of their attention appears to have involved unravelling the mess of bygone days. I don't envy their task (nor am I pointing a finger), but sometimes a turnaround should be just that...Turn around and move forward.

They have the likes of Aldi and Lidl to deal with, who appear to me to becoming victims of their own success, judging by the enormous queues in some stores.

Personally I think all six major supermarkets are at the verge of a dilemma, profit margins are being squeezed to the detriment of local suppliers and there are deflationary pressures, that are bearing down on the economy. They will take the hit first before most other businesses out there. It's a very competitive market, best for a consumer, rather than an existing investor, but there lies an opportunity. Picking the right moment to invest is key.

Aldi and Lidl have their issues too not least because they are outgrowing the size of stores required in some towns and cities, but they are evidently struggling with their own supply chain as demand grows.

I just see the Tesco Board having more balls in the air, than most, couple everything with their retreating global position, SFO investigation, deflationary pressures and falling till receipts... and inevitably it is extremely difficult to keep your eye on the ball.

There is also the ongoing political situation and issues arising with European trade and the referendum. (More balls to handle - if you will kindly pardon the expression).

Personally I don't think Tesco Management have found focus yet, judging by the report published. In fact it indicates there are more 'woes' to come. A complete turnaround appears someway off to me.

I personally would not see this as point to invest, the dead cat is still falling I think.

Glen_Clark

It isn't just Tesco though is it?
As the gap between rich and poor grows wider, all the middle of the road grocers, including Tesco, are losing customers at both ends.
They didn't change, their market did.
The best thing that could happen for them is a less extreme Government at the next election.
They were doing alright under a Labour Government.

veryintrigued

Glen_Clark wrote: »

They were doing alright under a Labour Government.

Weird comment.

They've done pretty alright under the Tory one the last five years i.e. 3-4billion operating profit each year for the last five.

http://www.tescoplc.com/index.asp?pageid=30