The once dominant supermarket chain confirmed this morning that it had slid to a full year pre-tax loss of £6.38bn, its worst year ever.
Shares in the company rose as the market opened, were virtually flat for much of the morning, and then fell in late morning.
The top ten largest shareholders in the once dominant supermarket chain features some familiar asset management names including Legal & General Investment Management with 2.98% of the company, BlackRock with 2.66%, and Schroders with 2.2%.
The scale of the loss was largely due to write downs to the value of its property, rather than sales, which only fell 1.3% year on year.
“Every year Tesco reviews the carrying value of its stores to ensure that they are supported by either their value in use or their fair value less the cost of disposal,” said Brewin Dolphin equity analyst Nicla Di Palma. “Due to difficult industry conditions the value of property has declined: basically, as the food retail industry faces difficult conditions and cuts its store opening programmes, the value of supermarkets declines.”
Di Palma sees a long road ahead as the company tries to turn its fortune around. “We remain convinced that there will not be an improvement in trading profit at least for the next couple of years when a market equilibrium is restored, hopefully with fewer large stores, although the large supermarkets don’t really seem willing to reduce the number of stores at this point. However, like-for-like sales could turn positive, which would be well received by the market.”
“When it comes to the future the new chief executive Dave Lewis provided little cheer, saying only that the market remains challenging and warning that there might be further volatility in future results due to the large-scale changes he is implementing,” said Ian Forrest, investment research analyst at The Share Centre.
“Investors may take some comfort in the market’s reaction to all of this bad news today. The shares rose 2% in early trading and remain well above the 155p low seen last December,” Forest added. The main reason is simply that all of today’s bad news was already anticipated and there was relief that the figures were not even worse.”
