What's the story on Tesco?
Supermarket chain Tesco plc (LON:TSCO) is set to report its full-year results this week, with analysts expecting some disappointing figures.
Shares in Tesco have fallen by 25% over the past 12 months largely as a result of concerns about its UK trading performance.
Recent industry figures from Kantar Worldpanel revealed that group sales in the 12 weeks to March 30 had fallen by 3%. Over 12 months, Tesco’s market share fell by 1.1% to 28.6%.
City analysts have been cutting their earnings-per-share forecasts on the stock over the past year. Consensus forecasts currently anticipate that EPS will come in at 29.9p. Net profit is expected to be £2.42bn and the dividend per share is predicted to remain stable at 14.6p.
Among the analysts, 10 currently have sell or strong sell recommendations on the stock, while just five rate it as a buy or strong buy. Seven are neutral.
What to watch?
Shares in Tesco’s rivals J Sainsbury and Wm Morrison both fell sharply during March on news of disappointing sales figures. Among the key questions asked this week will be how Tesco is countering the threat posed by fast growing discount chains like Aldi and Lidl.
Since taking the helm as CEO in 2011, Philip Clarke has replaced most of Tesco’s executive team. Two weeks ago Laurie McIlwee quit as finance chief. That leaves the focus of attention on Clarke for finding a way to shore up market share and win back customers.
What's next for Tesco?
Industry analysts think that structural changes in the shopping habits of UK consumers is bad news for the ‘big 4’ grocers. Some believe that the middle ground between discount stores and premium chains like Waitrose and M&S will continue to diminish.
Even so, Tesco remains by far the biggest supermarket group in the UK. With a forecast dividend yield of 5.1%, its payout falls just short of Sainsbury’s (5.4%) and Morrisons (6.4%).
But in terms of its financial quality and value attraction, Tesco presently beats its rivals on both counts.
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