TSCO.L - Tesco Plc

[lookingstill]

Also, interesting graph http://www.tescoplc.com/files/pdf/fastfacts/factsheet.pdf

[PlanMaestro]

Thought this was an interesting presentation and I haven't seen it posted here. http://www.media-server.com/m/p/k74r8okm

Also, an interview with Phil Clarke. http://www.tescoplc.com/index.asp?pageid=187&mediacategory=49&mediaid=290

 

Thanks. At 1:28, £26 billion estimated market value of all properties.

 

[Ballinvarosig Investors]

Tesco is at a new year-low, trading below £3 now. I am buying more.

 

By the way, the former CEO (Sir Terry Leahy) has a book out about how he turned Tesco around in the 1990's. Well worth reading for anyone who is interested in the company.

 

http://www.dailymail.co.uk/news/article-2150860/Tesco-like-Wild-West-I-kill-killed-Terry-Leahy-reveals-turned-unruly-stores-bullying-bosses-35bn-success.html?ito=feeds-newsxml

[PlanMaestro]

http://www.ft.com/cms/s/0/1c8167d8-a7e7-11e1-b8a9-00144feabdc0.html#ixzz1wxchtohE

 

Speaking at a Morgan Stanley retail conference, Mr Simon said he was happy with the sales performance of the 10 initial Walmart Express outlets, a mix of grocer, pharmacy and convenience store.

 

He added: “What we are also happy with ... is that inside of 12 months, they are turning profitable.”

....

 

Walmart’s move underlines the shift in the US from big hypermarkets to smaller stores, as consumers shop more locally amid rising fuel costs and to save money by cutting down on food waste.

 

But Walmart’s plans come at a delicate time for Philip Clarke, chief executive of Tesco. Last month, he revealed that Fresh & Easy would not meet its target of breaking even by February next year.

 

Instead, the chain is now expected to break even during the 2013-14 financial year. Tesco has also put significant US store openings on hold as it strives to make existing ones profitable.

 

Tesco is introducing a series of initiatives to turn round Fresh & Easy, including experimenting with a version of its “click and collect” online shopping service.

 

[PlanMaestro]

Just found a good Tesco write-up at the value investors club. One of these days I will simply have to buy just not yet. The following is the part I liked best:

http://www.valueinvestorsclub.com/value2/Idea/ViewIdea/2238

 

Since passing Sainsbury PLC as the UK’s number one food retailer in 1995, Tesco’s success in building on its leading position in its core food markets has been remarkable. From an estimated 19% share in the core food market in 1995, the company now enjoys a market share that has been estimated in recent articles to be as high as 29% among grocery retailers. Tesco has achieved this through a combination of continued strong growth in its Clubcard loyalty program, expanded sales of its own private label products to the point that a stunning 50% of all sales are Tesco-branded products, and leveraging of its buying power to pass on savings to customers to drive sales and build customer loyalty. Tesco has also used acquisitions to increase share when available. In January of 2003, the company bought 870 convenience stores from a struggling operator called T&S Onestop.

 

The success of the loyalty program cannot be overstated. Tesco Clubcard is the UK’s most popular loyalty program, with over 10 million Clubcard holders. When it was launched in the mid-1990’s, Tesco’s loyalty card scheme was the most successful of its kind. At that time, Sainsbury held the No. 1 market share position in the UK, but Tesco’s Clubcard program helped contribute to market share gains that led to Tesco’s market leadership position within six months of launching it.

 

Tesco has perfected the technique of offering its own private label products in addition to one or two leading brands in each product category. The company offers three distinct sub-brands in its private label lines. Tesco Value is positioned as the low-price point. The regular Tesco store brand competes with the brand leaders, and Tesco Finest is a range of premium products that are gourmet-quality and exceed the quality of the leading brand. This strategy has helped Tesco appeal to all income levels, helped defend against the marginal loss of sale to discounters, and helped the company to maximize its buying power.

 

The incredible result: Tesco branded products represent approximately 50% of Tesco’s total sales

 

 

 

 

[PlanMaestro]

Terry Leahy Defends U.S. Fresh & Easy Venture (and pitches his new book)

 

http://live.wsj.com/video/ex-tesco-boss-defends-us-fresh--easy-venture/DEF3979C-ECD4-48E0-B43F-0720F9998797.html?mod=wsj_article_tboleft#!DEF3979C-ECD4-48E0-B43F-0720F9998797

[PlanMaestro]

Something to watch closely ....

 

Tesco sees rebound in UK sales

http://www.ft.com/cms/s/0/8f56393e-e62e-11e1-ac5f-00144feab49a.html#ixzz23bO8JB4L

 

Tesco has had its first rebound in UK sales since it embarked on a turnround plan after its first profit warning for more than 20 years in January. According to industry data from Kantar Worldpanel, the consumer research group, Tesco was the fastest growing of the so-called big four supermarkets in the four weeks to August 5.

 

Tesco increased sales by 5.1 per cent over the period, ahead of the total grocery market at 4.2 per cent, while its market share rose from 31 per cent to 31.4 per cent.

 

However, analysts and retailers said Tesco had been promoting aggressively over the past four weeks. It embarked on an innovative promotional strategy late last month, where customers who spent £48 on five key brands between July 23 and August 1 could gain 50p off of a litre of fuel. It also ran a £5 off a £40 shop voucher campaign during the period, and has been offering promotions on branded goods.

 

Dave McCarthy, analyst at Investec Securities, said: “Tesco’s sales have clearly picked up in the last few weeks, helped by extensive promotions and vouchers. Effectively, Tesco has been buying sales. While any recovery must start with sales growth in the first instance, Tesco has to prove that these sales gains are sustainable and can generate profits.”

 

 

[PlanMaestro]

Tesco profits fall for first time in almost 20 years

http://www.guardian.co.uk/business/2012/oct/03/tesco-profits-fall-uk-supermarkets?newsfeed=true

 

Overall group trading profit dropped 10.5% to £1.6bn in the six months to 25 August; within Britain, profits were down more than 12.4% at £1.1bn. "The market was prepared for a decline in profits but this is a disappointing statement even in that context," said Seymour Pierce analyst Kate Calvert. She said the performance of Tesco Bank, which will launch current accounts next year, "was the only positive".

 

New laws in Korea mean Tesco can no longer trade its Homeplus stores round the clock and must close two Sundays a month – a restriction that is expected to shave £100m off group profits this year. Problems also emerged in its previously reliable Central European division, where profits slumped by a fifth as the "chill winds" of the crisis in the eurozone reached consumers in Poland, the Czech Republic and Hungary, who are cutting back spending on non-essential goods such as electricals and homewares.

 

Speculation over the future of Fresh & Easy also intensified after it announced a worse than expected loss of £74m and slowed the rate of new store openings for a second time. Clarke insisted shareholders were more interested in the fate of the domestic operation: "The real question from investors when I speak to them is about the UK. So many retailers who have gone global have given up their home market … I will not allow that to happen and I could feel that it was in danger."

[lookingstill]

Third quarter management statement

http://www.tescoplc.com/index.asp?pageid=17&newsid=713

 

 

 

 

 

[lookingstill]

Strategic review of fresh & easy

 

http://www.tescoplc.com/index.asp?pageid=17&newsid=714

[PlanMaestro]

http://www.ft.com/cms/s/0/cf7968c2-6001-11e2-b657-00144feab49a.html#ixzz2IIdPbIvL

Tesco has responded in textbook fashion since becoming – unwittingly – the most famous purveyor of wrongly-designated meat to UK consumers since Sweeney Todd.

 

So it has cleared the shelves of all products that have been through Silvercrest Foods, not just the ranges of own-label beef burgers contaminated by horsemeat and pork. It is investigating what happened and how to prevent a recurrence. It has apologised to customers and is advertising its trustworthiness and openness in as many ways as it can.

 

{…}

 

This gives rivals an opportunity. It will be particularly welcome for them as Tesco was getting back on to the front foot after its 2012 profit warning. UK sales rose 1.8 per cent in the six weeks to January 5, compared with the same period the previous year, while Kantar Worldwide data suggest its market share in food and drink had risen to 29.6 per cent in the four weeks to December 23.

[PlanMaestro]

 

Ocado must start delivering the goods.

http://www.independent.co.uk/news/business/analysis-and-features/ocado-must-start-delivering-the-goods-8329598.html

 

That said, Tesco has a near-50 per cent share of the online grocery market, compared with Ocado's 14 per cent. Despite this, the market is growing rapidly. Online grocery spend is forecast by the trade body IGD to rise to 6 per cent of the total grocery market by 2016, up from 3.8 per cent last year.

 

However, the profitability issue continues to dog Ocado. While the online grocery has made a profit in isolated quarters, Numis forecasts a loss of £6.4m for the financial year just ended. With its Hatfield site running close to full capacity, the internet company is building a second distribution facility in Dordon, Warwickshire, at a cost of £210m. This is to deliver increased capacity and efficiencies, which will come through on its profit margins, as sales volumes grow massively.

 

But Clive Black, an analyst at Shore Capital, says: "Ocado is a business that delivers a good service for customers but not for shareholders. It has spent a huge amount of money on its existing distribution centre and the second site in Warwickshire is not short of money either at £210m. This is a gargantuan amount for a distribution centre."

 

Certainly, Ocado has already burned through hundreds of millions of pounds over the last decade, such as on IT systems, warehouse machinery, marketing and its huge fleet of delivery vans. In fact, its dedicated warehouse model – based on Hatfield as the hub with a handful warehouse spokes around the country – is radically different to the largely pick-in-store model used by Sainsbury's, Asda and Tesco. This means that supermarket giant's staff are able to fulfil online orders in store, which their vans deliver to houses in the local vicinity.

 

 

[lookingstill]

Preliminary results 2012/13. Exiting US. Stock down over 4%

http://www.tescoplc.com/index.asp?pageid=17&newsid=764

 

Webcast of results http://edge.media-server.com/m/p/phdhvg2n/?token=371e6e7e0514961a0b5b42671db6ee301415875

[PlanMaestro]

http://seekingalpha.com/article/1502092-tesco-fair-returns-with-limited-downside

[gary17]

I'm wondering if anyone's looked at TESCO lately.  I'm thinking of initiating some positions.  My thoughts

 

- The numbers look not bad -

- brand name seems really good

http://brandirectory.com/league_tables/table/uk-top-50-2012

- New CEO taking a different tack (pulling out of USA)

- firm should benefit when retail picks up in

- protection against inflation

- the online business model seems interesting

- the pound seems cheap

 

[VersaillesinNY]

Dave Sather (Sather Financial Group) gave a great presentation on Tesco PLC (TSCDY) and BP at the 2013 ValueConferences Equity Income Summit, August 7-8, 2013.

 

The Manual of ideas:

http://www.youtube.com/watch?v=cqH8E3e0iSo

[gary17]

Thanks for sharing this. I did buy tesco but then sold to buy something else. Very tempted to initiate a position.

[claphands22]

Dave Sather (Sather Financial Group) gave a great presentation on Tesco PLC (TSCDY) and BP at the 2013 ValueConferences Equity Income Summit, August 7-8, 2013.

 

The Manual of ideas:

http://www.youtube.com/watch?v=cqH8E3e0iSo

 

Thanks!

[klarmanite]

Curious to hear peoples intrinsic value estimates for Tesco. My blended estimate is about 4.9 GBP. I base this on the average of what I consider to be a fair owner earnings multiple and a very conservative DCF.

 

It seems to me that Tesco is currently victim to classic market myopia - focusing on the failed US expansion and near term same store sales growth weakness / marginal loss of market share, when the moats of the company are solid and there are several growth opportunities avalilable.

 

This seems like one of those situations where nothing much will happen for a while (the safe, high dividend and low payout ratio is nice in the meantime) and once improvement and growth is evident again, repricing will happen fairly quickly.

 

Full disclosure: Tesco is about 7% of our portfolio. We are likely to buy more in the near future.

[cr6196]

Curious to hear peoples intrinsic value estimates for Tesco. My blended estimate is about 4.9 GBP. I base this on the average of what I consider to be a fair owner earnings multiple and a very conservative DCF.

 

It seems to me that Tesco is currently victim to classic market myopia - focusing on the failed US expansion and near term same store sales growth weakness / marginal loss of market share, when the moats of the company are solid and there are several growth opportunities avalilable.

 

This seems like one of those situations where nothing much will happen for a while (the safe, high dividend and low payout ratio is nice in the meantime) and once improvement and growth is evident again, repricing will happen fairly quickly.

 

Full disclosure: Tesco is about 7% of our portfolio. We are likely to buy more in the near future.

 

I bought the first profit warning in 2012 but I think this is just dead capital and I sold a while ago. The moat is fairly solid in that they have a large number of stores that people are going to keep using but the SS trends reflect the fact that they are getting squeezed from all angles. To keep it brief I will focus on the UK business...the basic story here is that discounters (Aldi/Lidl) are growing 25% per year and are causing complete chaos for a few of the incumbents. The weakest is Morrisons, they have pulled together a bit but they are still noticeably weak, the saving point is that they have huge share in Yorkshire although this probably the next target for discounters. After that it is, unfortunately, Tesco. Asda are extremely competitive on price and Sainsburys have huge market share in London which is the only area growing fast and is unattractive for discounters (it is significantly more affluent than the rest of the UK). The problem with discounters is compounded by the fact that they built up large stores at the wrong time. They are competing in a wide variety of categories which today in retail means competing with all channels too. Asda are generally better at this as they compete on price, Sainsburys moved into convenience ahead of everyone else. I don't think their online prospects are particularly strong either, again they are probably stuck in the wrong markets. Finally, after Leahy management is clearly pretty weak (incidentally, guess where he went to when he left...discounters). They seem to have kind of vague plan about what to do but they can't change investments they have already made, this is their biggest problem. Also, I find some of what management say to be disingenuous, the most worrying example was the claim that their UK property was worth £25bn, this figure was gross not net (most of their property is held through 50% JVs with big developers) something they conveniently forgot to point out (what was most pathetic about this was that it took analysts all of a day to work out, if your going to obfuscate at least make it good). To be clear, I don't see a huge amount of downside either but, so far, they haven't shown how they are going to deal with these issues. I also have pretty much no faith in their international stuff but that is for another time.

[Kiltacular]

Curious to hear peoples intrinsic value estimates for Tesco. My blended estimate is about 4.9 GBP. I base this on the average of what I consider to be a fair owner earnings multiple and a very conservative DCF.

 

It seems to me that Tesco is currently victim to classic market myopia - focusing on the failed US expansion and near term same store sales growth weakness / marginal loss of market share, when the moats of the company are solid and there are several growth opportunities avalilable.

 

This seems like one of those situations where nothing much will happen for a while (the safe, high dividend and low payout ratio is nice in the meantime) and once improvement and growth is evident again, repricing will happen fairly quickly.

 

Full disclosure: Tesco is about 7% of our portfolio. We are likely to buy more in the near future.

 

I bought the first profit warning in 2012 but I think this is just dead capital and I sold a while ago. The moat is fairly solid in that they have a large number of stores that people are going to keep using but the SS trends reflect the fact that they are getting squeezed from all angles. To keep it brief I will focus on the UK business...the basic story here is that discounters (Aldi/Lidl) are growing 25% per year and are causing complete chaos for a few of the incumbents. The weakest is Morrisons, they have pulled together a bit but they are still noticeably weak, the saving point is that they have huge share in Yorkshire although this probably the next target for discounters. After that it is, unfortunately, Tesco. Asda are extremely competitive on price and Sainsburys have huge market share in London which is the only area growing fast and is unattractive for discounters (it is significantly more affluent than the rest of the UK). The problem with discounters is compounded by the fact that they built up large stores at the wrong time. They are competing in a wide variety of categories which today in retail means competing with all channels too. Asda are generally better at this as they compete on price, Sainsburys moved into convenience ahead of everyone else. I don't think their online prospects are particularly strong either, again they are probably stuck in the wrong markets. Finally, after Leahy management is clearly pretty weak (incidentally, guess where he went to when he left...discounters). They seem to have kind of vague plan about what to do but they can't change investments they have already made, this is their biggest problem. Also, I find some of what management say to be disingenuous, the most worrying example was the claim that their UK property was worth £25bn, this figure was gross not net (most of their property is held through 50% JVs with big developers) something they conveniently forgot to point out (what was most pathetic about this was that it took analysts all of a day to work out, if your going to obfuscate at least make it good). To be clear, I don't see a huge amount of downside either but, so far, they haven't shown how they are going to deal with these issues. I also have pretty much no faith in their international stuff but that is for another time.

 

+1

[klarmanite]

I respectfully disagree on several points (discounter impact in the long term , online prospects, international business, value of property portfolio, management quality).

 

So basically almost everything  :D

 

I do agree that the store size is an important issue. This adjustment (less big box --) more small format) will be painful and take time. And probably lead to more writedowns.

 

Thanks for sharing your thoughts! Appreciate it.

[cr6196]

I respectfully disagree on several points (discounter impact in the long term , online prospects, international business, value of property portfolio, management quality).

 

So basically almost everything  :D

 

I do agree that the store size is an important issue. This adjustment (less big box --) more small format) will be painful and take time. And probably lead to more writedowns.

 

Thanks for sharing your thoughts! Appreciate it.

 

Why?

[klarmanite]

Hi

 

For several reasons. It would be interesting to discuss further, sorry for not going into more detail, too tired today. Dumb idea to voice my disagreement when I don't have the energy to argue my point...

 

I recently did a fairly comprehensive write-up on Tesco, but it's in Norwegian so it won't be of any use to post. It was quite long and I'm to lazy to translate it. Let me get back to this later. Or if you like, you can give me a call this week (PM me) and we can discuss it.

[klarmanite]

Interesting webcast yesterday. I think management is making a good impression here. The sell-side focuses on getting quick and precise answers to things like:

 

"How will you regain market share"

 

and

 

"how much will online grow over the next few years."

 

 

Management's honesty is refreshing: "we don't know what will happen next. We focus on creating an offer that should offer quality and value and then we'll see what happens."

 

This really is the only way to play this situation, and IMO their efforts are likely to succeed. I'm impressed by the remodels and multichannel offering that Tesco is creating.

 

Hopefully, the lack of clarity will offer even lower prices.

 

I'm reminded of a quote by WEB:

 

"An (...)argument is made that there are just too many question marks about the near future; wouldn’t it be better to wait until things clear up a bit? You know the prose: “Maintain buying reserves until current uncertainties are resolved,” etc. Before reaching for that crutch, face up to two unpleasant facts: The future is never clear; you pay a very high price in the stock market for a cheery consensus. Uncertainty actually is the friend of the buyer of long-term values."