Tesco’s first set of prelims under new boss Phil Clarke came in much as expected, although there were some City worries at the UK performance and scale of US losses.
Clarke set out six immediate priorities for his team and “keeping the UK strong and growing” was top of the list.
Nomura, advising buy, said: “While the proof will be in the delivery, we are encouraged to see the creation of an enlarged global executive committee and a UK operating board, with experienced operators returning to Tesco’s largest business.”
Panmure, also a buyer, argued: “The shares are too cheap if Tesco can execute better in the UK, drive higher international returns and generate cash. We think it will do all of the above and that will drive a significantly higher share price.”
Singer alighted on plans to step up Tesco’s non-food business and said: “With over £5bn of sales, and space potentially increasing by 10% per annum, intensification of its offer will result in more pressure for a number of general retailers including those already having to compete harder.”
Arden, recommending add, noted uneasily the performance of US business Fresh & Easy:
“The loss here was an alarming £186m, but Tesco is still promising to get this to break-even by the end of next year, which would be a remarkable turnaround.”
Investec upgraded its recommendation on DIY group Kingfisher from sell to hold and set a new target price of 245p. The broker cautioned, however: “While Kingfisher has regained upgrade momentum, supported by continuing sterling weakness, we retain concerns on several matters. These include delivering and retaining gross margin gains and the medium-term prospects of B&Q attaining its operating margin target.”
Mothercare is expected to name former Asda director Mike Logue managing director of its under-pressure UK business. The appointment will allow chief executive Ben Gordon to devote more time to group strategy and international operations.
Hold Debenhams advised Numis following last week’s results. The broker was unworried by chief executive Rob Templeman’s intention to hand over the reins to his deputy, Michael Sharp. Numis said: “We believe Rob has probably completed most of the plans he had for the business. Michael is a good product man and a safe pair of hands to continue the current strategic direction.”
Despite all the bank holidays next week, there will be some big retail disclosures. Game publishes full-year numbers, Primark parent ABF issues interims and Kantar grocery market share data will be released.