Tesco Share Discussion Threads

[nathdani] 08/4/2020 15:44

the bit I like about asia sale is covering the pension deficit .

[essentialinvestor] 08/4/2020 15:40

Results read well to me. £1 billion off net debt in 12 months.

Any weakness may be an opportunity to add imv. Had a small amount this AM.

[panshanger1] 08/4/2020 14:50

Minded to add. Political statement this morning and had to sound fairly gloomy as getting the rates relief and upping the dividend at the same time.Fuel and general merchandise struggling but food and booze must be stellar with a nice increase in operating margin to come through.Not many dividends around at the moment and this is one of the few businesses that are actually trading !

[philanderer] 08/4/2020 14:12

Tesco downgraded as analysts discover coronavirus “more of a headache” for supermarkets


Shore Capital analysts downgraded the supermarket group and put their rating for rival Sainsbury's under review as extra costs were estimated at £650-925mln

Tesco PLC (LON:TSCO) was downgraded by Shore Capital as analysts there and elsewhere said the surge in supermarket sales from the coronavirus seemed have been “more of a headache” than the boost it first seemed.

The FTSE 100 supermarket giant on Wednesday reported results for the year to 29 February 2020, showing lower sales and statutory profits but higher underlying profits for the past year, but also warning about that in the current year it was going to incur “significant additional costs”.

One of the main takeaways for the Shore Cap analysts was about the extra costs from dealing with “feeding the nation” that Tesco estimated at £650-925mln.

Although financial guidance was withdrawn, Tesco said it expects the sales uplift and business rate relief amid the coronavirus outbreak may offset set the higher costs.

Overall, Shore Cap’s retail team downgraded pre-tax profits for the year to February 2021 to “probably flat for retail” and, as Tesco Bank is now expected to be loss-making in the current year, downgraded their expectations for group profits and earnings per share.

On the dividend, the analysts note there has been “some debate”, but the declared 6.5p payout was ahead of its 5.8p forecast, and that there “appears to be progress” with the Asian disposal towards completion before the end of the financial year, amounting to a circa 51p per share payout.

With replacement chief executive Ken Murphy arriving from Walgreen Boots in the autumn, the Shore Cap analysts, led by Clive Black, said “well done Dave Lewis in seeing through your plan” to turn around the group since 2014.

“We are pleased with the FY2020 outcome and we continue to believe that a tight but attractive investment thesis is in place from which shareholders should benefit in due course, including an ongoing potential boost to earnings from the possible share buy-back programme.”

However, following the outlook statement, Shore Cap removed its ‘buy’ recommendations and moved to ‘hold’ on Tesco's shares

More of a headache than the boost

The results, said Russ Mould, investment director at AJ Bell, are a reminder that the panic buying at supermarkets has significant costs as well as benefits.

“Eye-catchingly these costs, of recruiting and training new staff and bringing on additional delivery capacity, could ultimately total close to £1bn – though they may be offset by business rate relief, ‘prudent management’ and an uplift in sales,” Mould said.

“Growth is only really relevant if it is profitable and the 30% surge in sales in recent weeks may have been more of a headache than the boost it might superficially have appeared to be.”

He said the dividend will provide “some comfort” for investors and that “Tesco is still better placed than many other businesses as demand for the food and essentials will continue through the current period of economic stasis”.

Richard Hunter at Interactive Investor also highligited that from an environmental, social and governance (ESG) perspective, the company has made many financial contributions, including to staff and local communities, “which could see it favourably regarded once the coronavirus dust has settled”.

He said Tesco “is at an interesting juncture, not least because of the ramifications of the current pandemic”, with the 2019 results “marginally disappointing in some areas”, including the costly transformation being undertaken in Central Europe.

Hunter also noted that the presence of discounters Aldi and Lidl continue to be a thorn in the side of the more established players, while there are also rising threat of competition from the likes of Amazon or a “newly-revitalised” Asda, which he said had all combined to crimp overall profitability, despite 2018 acquisition Booker now accounts for around 11% of group sales.


proactiveinvestors.co.uk

[konradpuss] 08/4/2020 13:51

Shore Capital have gone from buy to hold, why?

Well, a few reasons. In the web cast the company gave a view of the extra costs verses
the extra income and reduction of Business Rates next year. On an optimistic view they almost balance. On a pessimistic view the virus could cost the company circa £200 million.

Then Tesco bank, they predict will make a loss.

None of the analysts ask about the Thai deal which was a bit disappointing.

I think this is why the share price is weak today.

[ladeside] 08/4/2020 13:45

That's an absolutely ridiculous piece from TMF, it's so one sided it's untrue.

First off he mentions the negatives but completely omits the positives, ie the increased staffing and logistic costs being virtually completely offset by the business rate scheme.

Secondly, these "exceptional costs" are indeed that, "exceptional", in other words Tesco won't require the additional 45,000 staff on payroll once this temporary situation finishes.

There's also additional costs such as the 10% colleague pay increase and the 15% discount, which are again only temporary measures.

Furthermore, being the biggest retailer with easily the largest market share is in fact a huge positive at this time of increased revenue, not to mention that good PR will undoubtedly see further returns in the form of footfall and associated growth.

There's also no mention of Booker and how that's already paying well ahead of schedule and of course the special dividend and pension deficit reduction haven't even been touched upon !!!

As I say, a completely amateurish and frankly pretty pathetic piece......

[alphorn] 08/4/2020 13:42

Hi H - all well thank you. Stay safe.

[debsdowner] 08/4/2020 13:31

TMF isn't convinced its a buy and the increase in sales doesn't make up for its increases costs, furthermore the competition in LIDL and ALDI are still eating into market share.

[hector_p] 08/4/2020 13:08

Hello Alp hope you are well.

BBC news telling us that TESCO will do OK later in the year , and of course have a business rate holiday.

[alphorn] 08/4/2020 12:42

younasm - I see that you are running option positions here.

What is your call about the treatment of any later special dividend? Would the strike price be left as for any other dividend or would it get adjusted downwards? If the former writing naked calls sounds very attractive?

I hope that you are well.

[grupo guitarlumber] 08/4/2020 12:36

Coronavirus: Tesco tells people to visit stores to get food

1 hour ago

Tesco has said that most food will still need to be purchased in-store amid the coronavirus pandemic.

The supermarket giant said it wasn't able to meet demand as more shoppers stay at home, despite the fact it has increased its online grocery shopping capacity by more than 20%.

[ladeside] 08/4/2020 12:36

It was an excellent update from Tesco and was very in depth.

Basically the increased staffing and associated costs are virtually offset by the Business rates being removed and profits continue to rise.

Most importantly the Dividend remains as do the plans for the "special dividend" plus the huge reduction of the pension deficit.

What's not to like ???

[smurfy2001] 08/4/2020 12:04

Kitchen sink statement.

Expect more companies to the same.

[ladeside] 08/4/2020 11:31

Tesco have no need at all to sell their Thai business.

If the agreed sale price isn't honoured then they will just pull the plug as it's making them fortunes.

Over and above this it was also a bidding war with three serious contenders, so basically Tesco hold all the Aces.....

[professor_x] 08/4/2020 10:39

Then maybe you just have to wait and see.

stay on the sideways.

Do you realise that Thai baht is very strong that's why they are buying it now.

[rolo7] 08/4/2020 10:35

Asia buyers could request a cheaper buying prices as the virus increases cost on the business.

[professor_x] 08/4/2020 10:18

Tesco Plc maintained its plan to pay a 5 billion-pound ($6.2 billion) special dividend in a rare bit of corporate good news as sales soar amid the coronavirus pandemic.

Britain’s largest grocer will push ahead with the payout even as other companies abandon dividends amid a nationwide lockdown.

Tesco experienced a 30% surge in revenue as shoppers reacted with panic at the prospect of a nationwide lockdown in early March, stockpiling everything from toilet paper to pasta. Demand has now stabilized, Tesco said, and most of the rationing measures it had put in place are no longer necessary.

Stock levels have stabilized as a result, Tesco said Wednesday. The company’s expenses are increasing though as it hires more staff to make up for absences.

The shares fell as much as 7.7% on Wednesday morning in London.

Tesco has added more than 45,000 employees in the last two weeks alone to help cope with demand and cover staff absences due to Covid-19. Costs will rise by 650 million to 925 million pounds as a result of increased wages and higher store running costs, Tesco said.

Chief Executive Officer Dave Lewis said Tesco is in a strong position to pay out a dividend and has thousands of small investors who hold less than 1,000 shares each and rely on the payout to help supplement their incomes. “We would not be paying a dividend if we felt it would jeopardize the business in any way.”

Tesco is also taking advantage of government help, including a year’s relief from business rates, a property tax, reducing its bill by 585 million pounds.

The company is only taking government help when needed, Lewis said. For example, the retailer isn’t taking advantage of an offer to defer value added tax payments and is making its 200 million pound payment on time.

[supercity] 08/4/2020 10:04

A lot can happen between the sale being completed and the special divi being paid - At this moment they are saying it will be paid but that could easily change one two three months from now

[deanforester] 08/4/2020 09:59

Read the RNS:

On 9 March 2020, the Group announced the proposed sale of Tesco Thailand and Tesco Malaysia to a combination of CP Group entities for net cash proceeds of $10.3 billion (equivalent to £8.0 billion) before tax and other transaction costs. The transaction is subject to shareholder and customary regulatory approvals and is expected to complete during the second half of calendar year 2020. Following completion of the disposal, the Board intends to return c.£5.0 billion to shareholders via a special dividend with associated share consolidation, and reduce indebtedness through a £2.5 billion pension contribution that is expected to significantly reduce the prospect of having to make further pension deficit contributions in the future.,/i.

[bigtune888] 08/4/2020 09:48

when will the £5bn div of Thai and Malaysian operation sale be paid?

I bought £18k of shs just below 213p.

They were not allowing PI to buy sub 210p.

Although I took 16.7K ctd average 212.80p and dumped at 218p. I wanted a quick £500-£800 scalp. did not get greedy.

[nathdani] 08/4/2020 09:45

Like I said Tesco just cant take the money during this crisis only half the tills normally open and stores open on shorter opening hours its obvious really.

[hazl] 08/4/2020 09:41

People have to eat.

Conversely, Tesco has said people are not panic buying as much as usual, so presumably the extra staff requirement will tail off...so costs should lessen again.

This strange situation we see ourselves in is temporary,hopefully, but I repeat,people will still need to eat .

[the oak tree] 08/4/2020 09:34

Think Imastu post above sums up my thoughts exactly, so can only copy and paste to highlight it!

"I thought it quite wise to state that the benefits of the business rates relief matched (funny that...) the increased staff and other operating costs of 'feeding the nation.'

Too much profit = upset the meeejah and MPs (and the previous poster), too little profit = upset the stock market. Sensible approach to minimise 'outrage' in tabloid Britain."

Yes a bit of PR there.......

[alphorn] 08/4/2020 09:30

Pleased to have balanced my exposure yesterday. Results look fine in the circumstances but remain very pessimistic about the domestic economy. (Also pleased that they maintained a dividend payout - good move).

[grupo guitarlumber] 08/4/2020 09:26

Sean Farrell
Sharecast News
08 Apr, 2020 07:39 08 Apr, 2020 07:39
Tesco ups final dividend amid Covid-19 sales surge
cbtescosupermarket short
Tesco
217.00
09:08:25 08/04/20
-4.09%
-7.20

Tesco increased its final dividend as the supermarket group reported a 13.5% increase in annual underlying operating profit.
FTSE 100
5,654.45
09:08:20 08/04/20
-0.88%
-50.00
FTSE 350
3,160.49
09:08:20 08/04/20
-0.65%
-20.52
FTSE All-Share
3,121.57
09:08:20 08/04/20
-0.63%
-19.71

The company proposed a final dividend of 6.5p a share, up from 4.10p a share a year earlier. The final dividend takes the total payout for 2019 to 9.15p a share – an increase of 58.6%.

Operating profit before exceptional items and amortisation for the year to the end of February rose to £2.96bn from £2.61bn as sales dipped 0.7% to £56.5bn. Pretax profit fell 18.7% to £1.32bn.

Tesco's board faced calls from shareholders to pay a final dividend even though many other companies are suspending payouts to conserve cash in the Covid-19 crisis. Tesco said its annual dividend was 50% of earnings and that it intended to maintain that ratio in future.

Tesco said: "Reflecting the strength of our performance last year and given our robust liquidity and balance sheet, we propose to pay a final dividend of 6.50 pence per ordinary share."

Britain's biggest retailer has had a sales boom during the coronavirus crisis as customers have emptied shelves in panic buying sprees. Tesco has recruited thousands of extra staff to cope with demand and employees taking time off because of the virus. The company estimated the additional cost at between £650m and £925m.

Dave Lewis, Tesco's chief executive, said: "In this time of crisis we have focused on four things: food for all, safety for everyone, supporting our colleagues and supporting our communities. Initial panic buying has subsided and service levels are returning to normal. There are significant extra costs in feeding the nation at the moment but these are partially offset by the UK business rates relief."