2012 has so far brought disappointment for Tesco shareholders. After lacklustre Christmas figures and a small drop in market share, Tesco shares plunged over 20%, and have stayed close to these levels despite a strong rally in the underlying market.
For a long time Tesco’s
It seems however, that the competition is catching up. Tesco are facing strong price competition from the likes of Asda (Wal-Mart), and smaller discount retailers such as Lidl and Aldi are also posing a threat. Additionally they are facing increasing product and service competition from Waitrose, Sainsbury’s and Morrison’s.
It hasn’t helped matters that Tesco have branched out much further than the other supermarkets into areas such as consumer electronics, clothing, banking and insurance. All these areas are have been hard hit by the economic downturn, and as such have left Tesco more sensitive to adverse trading conditions than many of its rivals.
Some of these areas, especially ones that are exposed to cheap online competition, need to be looked at and evaluated accordingly, then when the economy finally improves, Tesco could perhaps be in a prime position to outperform once more.
At the current share price Tesco’s P/E ratio is 8.97 making it the cheapest
Would like to add to this post that investor extrodinaire Warren Buffett bought into Tesco after its decline. He now owns over 5% of the company. Not a bad person to copycat!
ReplyDeleteSorry, should also disclose that i'm a holder of tesco shares. Not trying to ramp the stock honest ;)
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