Trading is getting worse at Tesco (LSE: TSCO). In Britain, like-for-sales fell by 1.5% during the third quarter, having been flat in the previous three months.
Tesco has lost the initiative in the UK grocery market to Sainsbury's and is no longer benefiting from a growing number of maturing stores. It seems that Tesco is suffering from an identity crisis customers don't really know what it stands for. It is losing out at the quality end of the market to Sainsbury's and Waitrose, and at the value end to Aldi and Lidl.
Moreover, it is saddled with the problem of having lots of huge hypermarkets that are struggling to pay their way. Many of these will be locked into long-term rental agreements that will be expensive to get out of. Tesco still has around a 30% share of the British market, but I can'thelp wondering how much of this it will lose over the coming years.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Its large overseas exposure used to be one of the main reasons to buy Tesco. Not any more. Here too, trading is ugly. Not one country where it operates managed to grow in the last three months. Like-for-like sales fell by over 5% in Asia and by 4% in Europe. The shares do not look expensive on 11 times next year's earnings, but nor are they screamingly cheap. Analysts' forecasts are more likely to fall than rise, while a yield of 4.3% may not be enough to reward shareholders, as it is unlikely to grow. Sainsbury's still remains the best bet in this difficult sector. Life for Tesco could be tough for a good while yet.
Verdict: sell
-
Tycoon Truong My Lan on death row over world’s biggest bank fraudProperty tycoon Truong My Lan has been found guilty of a corruption scandal that dwarfs Malaysia’s 1MDB fraud and Sam Bankman-Fried’s crypto scam
-
Why undersea cables are under threat – and how to protect themUndersea cables power the internet and are vital to modern economies. They are now vulnerable
-
How to profit from rising food prices: which stocks should you invest in?Tips Food prices are rising – we look at the stocks to avoid and the one to invest in this sector.
-
Tesco looks well-placed to ride out the cost of living crisis – investors take noteAnalysis Surging inflation is bad news for retailers. But supermarket giant Tesco looks better placed to cope than most, says Rupert Hargreaves.
-
Tesco sells its retail subsidiary in Thailand and Malaysia for £8bnNews Tesco has agreed to sell its southeast Asian operations to Thai conglomerate Charoen Pokphand for £8.2bn in cash.
-
Tesco should keep its Asian assetsOpinion The £7bn that Tesco could get for its Tesco Lotus business in Asia looks enticing. But holding on to it would be smarter, says Matthew Lynn.
-
Tesco cashes out of the mortgage businessFeatures Tesco Bank has left the mortgage market by selling its £3.7bn loan book. Its 23,000 customers will be moved to the Halifax, a subsidiary of Lloyds.
-
Share tips of the weekFeatures MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages.
-
Tesco wields the axeFeatures Britain’s biggest supermarket is cutting back on staff and fresh food. Will the move prove counterproductive? Matthew Partridge reports.
-
If you'd invested in: Tesco and Associated British FoodsFeatures Tesco has seen its market value rise almost 50% in a year, while AB Foods has seen shares slide despite a rise in profits.
