Tesco plans to return capital to shareholders

Published On: October 4, 2021Categories: Stocks & Shares2 min read

The group’s share has risen by 10% this year, despite being the worst performing of the three listed food retailers in the UK

Tesco plans to return capital to shareholders when it reports its half-year results on Wednesday as the UK’s largest food retailer aims to ignite shares that lag behind its rivals.

The group’s share has risen by 10% this year, despite being the worst performing of the three listed food retailers in the UK and gaining momentum.

In contrast, J Sainsbury’s stake has increased by almost 30%. Morrisons that is the subject of Takeover battle On Saturday, US private equity funds Clayton, Duville and Rice won more than 60 per cent.

Revenues also lag behind those of continental peers such as Ahold Delhaize and Carrefour. However, analysts say Tesco, which thrived during the pandemic as pubs and restaurants were forced to close for long periods of time, once again dominates the domestic market.

Andrew Porteus, an analyst at HSBC, said: The previous team laid the groundwork for rebuilding the operating model and starting to improve commercial offers, but the new management did. It really tightened the business and promoted sales.

According to research group Kantar, only one of the four major grocery stores has maintained market share since early 2020. Rivals Asda, Morrisons and Sainsbury’s have all been handed over to discount stores Aldi and Lidl.

Since then sale of asian business In March, Tesco returned £ 5 billion to shareholders through a special dividend, reduced debt and strengthened its defined benefit pension plan. Both measures will improve future profitability and cash flow.

Bernstein analyst William Woods said Tesco has won on multiple fronts and has a share among all age groups and social classes in almost every region of the UK.

The redesigned Clubcard provided owners with significant discounts on popular lines, rather than a chance to earn points, helping to increase loyalty and win new customers.

It’s very difficult to find problems with executions, offers, or customer appetite, Woods concludes.

One of the reasons this momentum isn’t boosting market share is that Tesco, whose market value is greater than Morrisons and Sainsbury’s combined, is considered by many to be too big for a private equity acquisition.

Clive Black, Research Director at Shore Capital, said: But the market has a fairly low probability of it.

Black believes the company will use the six-month results to set a runway to draw investor attention to the £ 1.5bn free cash flow that could be generated each year.

I don’t think buybacks will start shortly after the results. It’s likely spring, he predicted.

About the Author: Jonathan Adams

Latest articles

Go to Top