Investors hail Tesco in spite of gloomy results

Investors have welcomed Tesco’s results as a sign the supermarket giant is “back on track”, even though it reported a 28% profit drop and a pension deficit two times higher than the previous year.

Investors hail Tesco in spite of gloomy results


Tesco’s market abuse scandal took its toll on the FTSE 100 food retailer’s final results published on Wednesday. Operating profit before tax fell over 28% to £145m from £202m the year prior.  

Another bleak revelation in the group’s final results was the doubling of its pension deficit from £2.6bn to £5.5bn, thanks to falling interest rates and higher inflation.

But in spite of these negative items, market commentators emphasised a healthier operational picture at Tesco. 

“From an operational standpoint, it all seems pretty solid,” said Simon Murphy, head of Old Mutual UK large cap and manager of the Old Mutual UK Equity Fund.

“Profits and margin are ahead of expectations, net debt is better than people thought and all the customer metrics are positive.”

This chimes with Tesco’s own assessment of its full-year results, with the company reporting its brand health is the strongest it has been in five years.

“So far, we think [Tesco CEO] Dave Lewis is delivering,” said Murphy.

“We think he is gradually getting Tesco back to the virtuous circle of better customer experience and volume growth, which is what it used to do so well before it lost its way. The group needs to raise its margin to 3.5% to 4% by 2019 but it looks like it’s on track to do so.”



Latest Stories