Today’s game-changer: Moody’s just downgraded Tesco to ‘junk’

There was more bad news for embattled Tesco today, after it emerged that credit rating agency Moody’s had downgraded the supermarket to ‘junk’ status.


What happened?



Subscribe to MoneyWeek

Become a smarter, better informed investor with MoneyWeek.

Following the announcement of brutal cuts, shares closed at 209.25 yesterday, up 15%, the largest single-day rise in 27 years. Tesco's surge dragged the FTSE 100 up 2.34%, adding £3bn of value to the index by the day's close.

So what's the problem?

"We have downgraded Tesco's ratings because structural changes in the UK grocery retail market will continue to challenge the company's operating performance even with the benefits of the significant restructuring actions."

Advertisement - Article continues below

"Moreover, we think that the company's efforts to stabilise the UK operations and to protect the balance sheet, while helpful, will take time to implement."

What did the commentators say?

said the Telegraph

Tesco also came under fire from Pat McFadden, MP for the deprived Wolverhampton South East constituency. The area is one of 49 in which Tesco have abandoned plans to build new outlets.

"This decision is a betrayal of the people of Wolverhampton and a clear breach of the promise made to the people of the city." said McFadden. "Less than a year ago, the UK managing director of Tesco gave a pledge on behalf of the company that this investment would go ahead in the coming financial year.

What next?




Tesco should keep its Asian assets

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.
15 Dec 2019

The British equity market is shrinking

British startups are abandoning public stockmarkets and turning to deep-pocketed Silicon Valley venture capitalists for their investment needs.
8 Nov 2019

Beyond the Brexit talk, the British economy isn’t doing too badly

The political Brexit pantomime aside, Britain is in pretty good shape. With near-record employment, strong wage growth and modest inflation, there is …
17 Oct 2019

Tesco cashes out of the mortgage business

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.
5 Sep 2019

Most Popular


Three things matter for the UK housing market now – and “location” isn’t one of them

The UK housing market is frozen. And when it does eventually thaw out, the traditional factors that drive prices will no longer apply. The day of reck…
1 Apr 2020

What does the coronavirus crisis mean for UK house prices?

With the whole country in lockdown, the UK property market is closed for business. John Stepek looks at what that means for UK house prices, housebuil…
27 Mar 2020

Oil shoots higher – have we seen the bottom for the big oil companies?

Just a few days ago everyone was worried about negative oil prices. Now, the market has turned upwards. John Stepek explains what’s behind the rise an…
3 Apr 2020
UK Economy

How the coronavirus pandemic is killing cash

Covid-19 is making a huge difference to the way we live, work and do business. One of its less obvious effects, says Merryn Somerset Webb, is to accel…
31 Mar 2020