Thinking through the savage market reaction to the Tesco results and tying together all the investment cases I've made and read over the last few months, I'm genuinely unsure about my overall position on retail. I like it in some senses - I think Lookers, the car dealership, is underpriced as the market seems to extrapolate current weakness endlessly, and it's extremely cheap. I dislike it in other cases - Game (LON:GMG) , for instance, I wouldn't touch with a bargepole, as I think they offer no useful service to consumers. It is an undifferentiable (I hope that's a word!) product which you can either order online for cheaper, or better still, have downloaded direct to your desktop. Supermarkets, finally, left me distinctly more ambivalent. The sheer number of moving parts made it difficult to really weigh up the factors - though I do think they'll be good long run performers. There's a lot of cheap shares in the sector, though, and it almost seems like blasphemy for me not to touch any more retail stocks simply because they're 'in retail'. That is exactly the kind of pricing error I'm trying to exploit - good companies overlooked for bad reasons.
Which brings me nicely on to the thrust of the post and the title - the UK conundrum. Looking at a news report on Dixons, one line struck me - “The Christmas trading update from Dixons is likely to be frustratingly mixed again – good in the key Nordics business, not too bad in the UK and very bad in the rest of the group overseas.” Good in the key Nordics business, eh? So we have a failing UK business being propped up by strong international sales in some parts, and dragged down further in others? Now, where have I heard that story before? There's probably many more, but for this idea I'll focus on Dixons and the two I've had most exposure to - Tesco and Mothercare. In this post I'll run over the basics of the international businesses, and on Wednesday I'll discuss further the valuations.
Tesco (LON:TSCO)
Firstly, I should probably note that…
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