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Tesco - Cleaning out the closet

22 Apr 2015

Planet Retail sees the latest update as a reflection of the tough trading environment facing Tesco around the globe. The update provided the opportunity for Tesco to clean out the closet – in effect writing down property and getting much of the bad news out of the way. This will enable Tesco to focus on turnaround in 2015/16.

On Tesco’s Q4/FY results, David Gray, Retail Analyst at Planet Retail, commented:

“This morning’s news of the biggest loss in decades at Britain’s biggest retailer comes as a result of a writedown on the value of its property portfolio. The simple fact is the value of out-of-town sites has fallen as openings have been mothballed. Although it’s been a disastrous year, Tesco is in effect cleaning out the closet - enabling management to start with a clean slate in 2015/16 upon which to rebuild the business.

“But, the picture isn’t all negative. Rarely have a new management team had such a rapid impact on UK trading, which reported its smallest like-for-like decline in some time in Q4.  Range, availability, service and price perception are all understood to have improved under Dave Lewis and Alan Stewart. While concern remains over the state of the balance sheet, the more important metric of the actual health of the business, trading at the core UK unit is showing tentative signs of recovery.

“Even Europe, a region hit hard in recent years, reported its first quarterly like-for-like increase in a long time, although full year figures were understandably poor. The shift to focus on the most profitable and best performing stores is bearing a little fruit at least.

“Asia is where the real bad news - a region that despite its growth prospects continues to post widespread like-for-like declines. For the most part, this slowdown can be attributed to factors beyond Tesco’s control - political unrest in Malaysia and Thailand, regulation in Korea, and so on. Regionally, Tesco needs to hang in there, avoiding the temptation of a fire sale of assets in markets with long-term opportunity.”

 - Ends - -

David is available for further comment and can be contacted on +44 (0)20 7715 6132 or via e-mail at David.Gray@planetretail.net

 

PRESS:

Georgia Gaydon, Editorial Assistant

Tel: +44 (0)20 7715 6403; E-mail: georgia.gaydon@planetretail.net