This week we have seen further bad news relating to an over-statement of profits to the tune of £250m and some irregularities in the accounting process. Some senior executives have been suspended pending the outcome of an investigation. This has knocked the share price below 200p and has brought forward the start date for the new finance director.
The half year results have been delayed until this mess can be investigated. How the mighty are fallen! I wonder what Jack Cohen would make of the current state of affairs.
Reading some of the media headlines this past few days, you might think Tesco was on the verge of a collapse. The reality is that they are still likely to deliver profits of around £2bn in the current year. Yes, their share of the market has fallen over the past couple of years but they are still by far the largest supermarket in the UK with a market share of around 28%.
Whilst most of the profits are made in the UK, lets also not forget that Tesco is a global player. It has operations in many countries in Europe, further afield, Thailand, S. Korea, and Malaysia as well as joint ventures in India and China. These markets offer massive growth potential for the future. Of course, there have been set-backs in USA and Japan and I believe they may well have learned a few good lessons.
The company has large property assets - I believe at the last valuation they were said to be worth around 220p per share, that’s more than the current price of the whole business!
Another plus is the appointment of new people at the very top. New CEO Dave Lewis has 30 years retail experience with Unilever and new finance director Alan Stewart who now starts 2 months earlier than planned, comes highly respected from M&S.
|1 yr chart TSCO/SBRY|
(courtesy of Digital Look - click to enlarge)