Stocks in Focus: Tesco Plc

This week Danielle Gibson of NW Brown focuses on Tesco.

At the beginning of last year, Tesco announced a proposed merger with Booker Group Plc, the UK’s largest food wholesaler, in hope of strengthening the retailer’s UK offering. After many months of consideration and despite concerns from competitors, the Competition authorities finally confirmed their approval in December 2017, which was welcomed by both groups and their shareholders.

With the merger expected to complete in March 2018, Tesco has now confirmed that Charles Wilson, the current CEO of Booker Group will be appointed as CEO of Tesco’s retail and wholesale operations in the UK and Republic of Ireland. Mr Wilson has been with Booker Group for 20 years, where he was credited with driving the group’s successful turnaround following near collapse in 2007. His knowledge and long term experience in the sector should prove beneficial for the business, where he could be seen as a prime candidate for succession of Dave Lewis, the current CEO of Tesco.

Tesco has also announced that it intends to pay a final dividend of 2.0p per share for the current financial year, which brings the total dividends paid for the year to 3.0p per share.  The decision to pay a dividend demonstrates management’s confidence in the business and is reassuring for shareholders, who had not received a dividend since the accounting and operational issues that forced it to be cancelled in 2014.

Despite the encouraging steps that management are taking to turn the business around, Tesco still faces strong competition from the Limited Assortment Discounters (LADs); Aldi and Lidl. With the “big 4” supermarkets continuing to lose market share to the LADs, only time will tell whether the new approach is enough to restore the company to its former glory.

 



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