Friday, 29 August 2014

Tesco trading satement



One of the world’s largest retailers.  I have a holding in my income portfolio (epic code: TSCO)


Tesco issued a trading update today that confirmed most investors' worst fears, after the recent figures released from Kantar that showed Tesco's sales falling 4% over the last 3 months and their market share falling by 4% to 28.8%.  The Board has revised its outlook for the full year and they now expect trading profit for 2014/15 to be in the range of £2.4bn to £2.5bn; market expectations were for £2.8bn and compares to £3.3bn last year.  They also stated that trading profit for the six months ending 23 August 2014 is expected to be in the region of £1.1bn.

Then even more bad news - management have guided that they expect to set the interim dividend at 1.16p - a reduction of 75% from last year's interim dividend.  As Tesco joins the ranks of a dividend cutter, I will be cutting my losses and reinvesting the proceeds in an alternative stock.  This is one rule that I will not break for an income stock - once the difficult decision has been made to cut a pay-out it becomes much easier for directors to revisit this as a course of action in the future. 

They also mentioned that Dave Lewis (previously President of the Personal Care Division at Unilever) will now join Tesco a month earlier as Chief Executive on Monday 1 September 2014.

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