Archived article
Please note that tax, investment, pension and ISA rules can change and the information and any views contained in this article may now be inaccurate.
Tesco turnaround continues

Tesco (TSCO) 178.5p
Gain to date: 8.5%
Original entry point: Buy at 164.45p, 25 Aug 2016
Our bullish call on Tesco (TSCO) remains in the money and full year results (12 Apr) revealed good progress with the grocery giant’s recovery. Although pre-tax profit fell 39% to £145m after a £235m hit for overstating results in 2014, UK like-for-like sales grew 0.9%, the first reported full year growth for seven years.
Chief executive officer Dave Lewis says the recovery is ahead of expectations and Tesco is on track to achieve its 3.5%-to-4% operating margin target by 2019/20. Stronger cash generation and a drop in net debt from £5.1bn to £3.7bn means Tesco will also return to the dividend list in the 2017/18 financial year following a two year absence.
Same-store growth in the core UK business did decelerate in the fourth quarter and Lewis has yet to convince everyone of the merits of the £3.7bn takeover of Booker (BOK), a deal that would turn the supermarket titan into the number one player in the domestic cash and carry market too.
While the integration could prove a distraction for management, Booker is an audacious acquisition that will help Tesco keep costs and prices down for longer than rivals and gain greater exposure to the growing ‘out-of-home’ food market.
Competition from discounters remains fierce and the Booker deal brings complications, yet we’re staying on board with the turnaround. (JC)
Important information:
These articles are provided by Shares magazine which is published by AJ Bell Media, a part of AJ Bell. Shares is not written by AJ Bell.
Shares is provided for your general information and use and is not a personal recommendation to invest. It is not intended to be relied upon by you in making or not making any investment decisions. The investments referred to in these articles will not be suitable for all investors. If in doubt please seek appropriate independent financial advice.
Investors acting on the information in these articles do so at their own risk and AJ Bell Media and its staff do not accept liability for losses suffered by investors as a result of their investment decisions.
Issue contents
Big News
Editor's View
Exchange-Traded Funds
Feature
Great Ideas Update
Investment Trusts
Larger Companies
Money Matters
Smaller Companies
Story In Numbers
- 10 bagger: London Stock Exchange
- Most Popular Investment Trusts
- Most Popular Funds
- 255: WH Smith’s ever-increasing overseas exposure
- Zero: Hunting cannot provide earnings guidance
- Have UK employment levels peaked?
- Record ETF flows in the first quarter of 2017
- 76,230: Tesla largest US car maker by market cap