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Tesco Plc, Update – 24 July 2014

Company and Market Overview:

Tesco Plc is a grocery retailer that is headquartered in the UK. With more than 3,000 stores, employing 500,000 people worldwide, Tesco has grown to become one of the world’s largest supermarket chains since it was established in 1947. The group is a FTSE 100 company, listed under the general retailers segment of the London Stock Exchange.

The UK grocery market is subject to fierce competition and currently dominated by the “Big Four” supermarket chains, Tesco, Sainsbury’s, Asda, and WM Morrison. These firms occupy what is frequently referred to as the middle segment of the market, while continental discounters hold the lower tier and the home grown, quality-focused Waitrose and Marks & Spencer attract the more affluent customers at the higher end of the income spectrum.

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Trading Update

The saga of Tesco Plc’s fall from grace turned another page this week when the group filed a regulatory notice detailing how Chief Executive Philip Clarke would be replaced by David Lewis, a Divisional Head and Brand Manager from Unilever.

The removal of Philip Clarke represents the latest twist in a long and drawn out story which, despite the transfusion of new blood, remains far from over. In line with our earlier report, we see Tesco facing significant challenges over the months and years ahead, most notably in relation to consumer perceptions of the brand.

While the appointment of what is effectively a brand manager could potentially benefit the group in this regard, a sustainable turnaround in customer sentiment is something that can only be achieved over the long term.

Consequently, our current earnings outlook for Tesco Plc remains in place and unchanged. In short, we continue to see downward pressure upon earnings as well as the shares over the near to medium term.

Accordingly, we maintain our preexisting price target for the shares at 250.00 pence, with any upside from here likely to remain capped at or around 316.00 pence. The next major event scheduled in the calendar for Tesco Plc is the release of Interim Results on 01 October. We shall review both financial performance as well as the shares in greater detail at this time.

For further information relating to our outlook for Tesco Plc, please see our previous report here.

Tesco Plc Share Price Hourly Intervals

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IMPORTANT:
The contents of this report and the Stockatonia website (https://www.stockatonia.co.uk/) have been prepared to provide general information only, and as such, the specific needs, investment objectives or financial situation of any particular user have not been taken into consideration. Please always remember that the value of investments may fall as well as rise. Investing in securities, and any other products associated with them, carries a high degree of risk and may not be suitable for all investors. For advice or guidance related to investing in securities markets, please consult with your own financial adviser. 

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