Shore Capital stockbrokers has said that a focus on "price, cost control and cash conservation" at Tesco can "yield better returns" across its European portfolio, particularly its Irish business.
The London-based broker released a statement ahead of the publication of Tesco's interim results this Thursday, October 23.
It said that Tesco's Irish business reveals the group's "challenge in valuation terms, as the contraction in margins, driven by the competitive gains of the limited assortment discounters in this market, means considerable margin reduction."
Shore Capital estimates Tesco Ireland's sales at £2.07 billion, with the operation posting a trading profit of £80.6 million. It also estimates Tesco's 'Rest of Europe' sales at £6.45 billion, posting a trading profit of £224.4 million.
Previewing Tesco's interim results, Shore Capital said that "Such has been the catalogue of disasters announced by the company outside the conventional reporting calendar, the shares have materially de-rated. Uncertainties abound […] and commentators have filled the vacuum left by a company that has several investigations underway, delayed interim results and faces considerable challenges."
It said that it expects new Tesco group chief executive Dave Lewis to set out a "three to five year strategy for the group" when it posts its full year 2014/15 results next Spring.
Shore Capital estimates total sales of £60.4 billion for Tesco in FY2015, roughly a 5% decrease year-on-year.
© 2014 - Checkout Magazine by Stephen Wynne-Jones
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