Friday, 24 April 2015

Tesco is a company heading in the wrong direction

I often thought about investing in supermarket stocks and one of these was Tesco. For some reason I disliked this particular stock much more than say Sainsburys or Waitrose. I guess it is to do with my grocery shopping preference and the fact that I love collecting my Nectar points at Sainsburys.

After reading the latest Tesco news and seeing their reported 6.4 billion pounds in losses I am glad I stuck to my gut instinct on this one. Sometimes it is funny how you get a bad feeling about a company and at the time you cannot see why but it becomes apparent a year or two down the line. From what I have read and been told these past few weeks it is all doom and gloom for Tesco and as a result I can only see their share price going one way and that is down. I like companies with some form of growth and the fact that their stores. If company profits are at record lows dividends are likely to fall too and therefore this would not be a company I would want to invest my hard earned cash in.

I guess some people may hope that Tesco can turn it around and will be hoping to pick up a bargain as their share price drops. Right now the live Tesco share price is 224 pence (this is of 13.30 24th April). It was as low as 155 pence back in December and over 300 pence in May of last year. I cannot see it getting close to 300 pence again for some time. Decreasing profits and shop closures is very bad news for this company.

How can Tesco turn it around? I guess they can hope the price of their individual premises rises and their sales soar but hope gets you nowhere, action is needed. They need to concentrate on promoting their profitable stores and getting rid of their poorly performing stores. Some research needs to be done to find out why some stores perform well and others perform poorly, for example are the poor performers in areas with other high competition stores like Lidl or perhaps they have a unfavourable location away from major residential areas. I do wish Tesco all the best but for now I will stay clear of this supermarket stock.

3 comments:

  1. Alas I bought Tesco shares just before it all went pear shaped! There's nothing I can do really except to hang on to them as I don't want to make a loss. I think it's going to take a while for the new people in charge to turn things round but I can wait. I was tempted to buy more when the shares hit rock bottom but couldn't bring myself to. Maybe I should have!

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  2. That sounds like something I would do. I hope they can turn it around but I guess it will take time. It is hard to know whether you should have topped up to lower your average SP but I guess you will find out the answer to that question in the future.

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  3. http://seekingalpha.com/article/2958826-no-value-at-the-supermarket-tesco

    The book value is now only worth 80p per share, and I predicted the dividend cut months before it was even announced as they were increasing debt to pay the shareholders.

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