Trade Tesco Stocks
Tesco PLC, which trades as Tesco, is headquartered in Welwyn Garden City, Hertfordshire, England, UK. As of 2018, this British groceries and general merchandise retailer is the 9th-largest retailer in the world, measured by revenue, and the 3rd-largest retailer in the world by gross revenues.
Tesco has shops in 7 countries across Europe and Asia and is the market leader in groceries in the United Kingdom, Thailand, Hungary and Ireland.
Initially opened as a UK grocer, Tesco has expanded and diversified since the early nineties into the retail of clothing, books, furniture, electronics, toys, petrol, telecoms, financial services, and even Internet services, making Tesco more of a general merchandiser today.
Listed on the London Stock Exchange, trading under the ticker TSCO, Tesco is also part of the UK100, with a market cap of 21.24 billion GBP, as of October 2018.
Tesco was founded by Jack Cohen in 1919 as a group of market stalls in London. The name ‘Tesco’ first appeared in 1924 after Mr Cohen purchased a shipment of tea from T.E. Stockwell. He then combined the initials of Stockwell with the first two letters of his surname; the name ‘Tesco’ was then born.
The first Tesco shop was opened in Burnt Oak, Barnet in September 1931. By 1939, there were over 100 Tesco shops in the United Kingdom.
In 1947, Tesco Stores (Holdings) Limited was floated on the London Stock Exchange with a share price of 25 pence.
A year later, following a visit to North America, Cohen decided to venture into self-service. His first self-service shop was opened in Hertfordshire in 1948 and was initially met with mixed reactions from his customers. This store quickly expanded and relocated to bigger premises on the same street.
In 1956, Tesco opened its first supermarket in Maldon, Essex. This store included a counter service selling butter, cheese and meats weighed by sales assistants. In 1960, Tesco started selling clothing and household goods in their stores across the UK.
Over 200 branches were acquired in the north of England that same year. Interestingly, in 1961, the Tesco store, based in Leicester, featured in the Guinness Book of Records as the biggest shop in Europe.
Tesco also had its fair share of acquisitions during the 1950s and 1960s, growing to more than 800 shops. In 1957, Tesco purchased 70 Williamson’s shops; in 1959, the company purchased 200 Harrow Stores outlets; in 1960, 212 Irwin’s shops were acquired; in 1964, 97 Charles Phillips shops were added to the Tesco name; and in 1968, Tesco purchased the Victor Value chain. In May 1987, Tesco took over the Hillards chain of 40 supermarkets in the North of England for £220 million.
Over the years, Tesco has evolved and diversified its offering, catering to the needs of its clients and the changing market. In 1995, Tesco introduced ‘Clubcard’, a loyalty program, as well as an Internet shopping service. In the same year, overseas operations were introduced. In 1997, Terry Leahy assumed the role of Chief Executive of Tesco.
In July 2001, Tesco obtained a 35% stake in GroceryWorks USA and started providing internet grocery retailing in the country. The company also purchased 13 HIT hypermarkets in Poland in 2002.
In the same year, Tesco expanded its convenience shop market in the UK and purchased T&S Stores. The company expanded into Japan and Turkey a year later and purchased C Two-Network in Japan, and bought Kip, a Turkish supermarket chain. Over the next two years, Tesco expanded into other regions including Poland and Thailand.
In their quest to expand their products, Tesco started funding a small film studio in 2010. The goal was to produce Tesco exclusive direct-to-DVD films. Their first movie was released on the 6th of September 2010. It was called Paris Connections and was based on a popular novel by Jackie Collins. In September 2013, Tesco launched its first tablet computer. The seven-inch model was called the Hudl.
In 2013, Tesco stated that they were pulling out of the US market at a cost of £1.2 billion.
In the same year, Tesco purchased Giraffe, a cafe and restaurant chain, for £48.6 million. The company then started to open restaurants within some of its shops. As a result, Tesco Family Dining Ltd was created.
Dave Lewis, previously of Unilever, took over as Tesco CEO on the 1st of September 2014. A few months later, Lewis announced that he was closing the company’s head office in Cheshunt, including 43 Tesco shops and 49 new supermarket developments.
The company also then sold its Blinkbox on-demand video service as well as TalkTalk, its broadband and fixed-line telephone business.
At the beginning of 2017, Tesco merged with Booker Group, Britain’s biggest wholesaler. As a result, the UK’s largest food group was created, with Booker being the largest wholesaler in the UK and Tesco being Britain’s largest food retailer.
As of 2018, Tesco operates a variety of store types including Tesco Extra shops, Tesco Superstores, Tesco Express stores, Tesco Metro shops and Tesco One Stop shops, to name a few. Other services offered include home shopping, the Tesco Clubcard loyalty program, tech support, gardening, bakeries and even petrol stations.
After Tesco first started selling petrol in 1974, they also diversified into biofuels, offering biodiesel and petrol-bioethanol blends instead of pure diesel and petrol at their petrol stations. As of 2013, there were 200 joint Tesco Express/Esso sites in the United Kingdom.
For those who wish to use Tesco for their banking requirements, Tesco offers financial services through Tesco Bank, which was initially a joint venture with The Royal Bank of Scotland. Tesco Bank offers loans, mortgages, credit cards, savings accounts as well as insurances.
In 2007, Tesco Banks made a profit of £130 million, of which Tesco’s share was £66 million. By moving into the financial sector, Tesco diversified their brand and expanded their offering beyond the retailing sector.
Jack Cohen’s business motto was “pile it high and sell it cheap”, and with the expansion that Tesco has seen over the last two decades, it is evident why the company is one of the largest retailers in the world.
Tesco Stock History
Tesco was first traded back in 1947 and has since become a blue-chip stock in the United Kingdom. Unlike many other major stocks, Tesco has never had a split. However, Tesco investors have had a bumpy ride, as many other large corporations have stepped into the same spaces, creating competition for Tesco.
The financial crisis of 2008 and beyond was not good to Tesco. Prior to the crisis, Tesco traded close to the 500 GBX level at the start of 2008, and they dipped all the way down to the 150 GBX level by 2016.
April 2018 saw a turnaround for Tesco which jumped to the top of the FTSE 100 after reporting a 28% surge in annual profits. Tesco was trading at 222.8p a share in April 2018, up 5.9%, pushing the UK blue-chip index two points higher to 7,269.
Tesco also reported profits of £1,644 million for the year up to 24 February 2018, up from £1,280 million in 2017 and higher than the £1,575 million guidance. Tesco does pay its shareholders dividends, with a 2p per share payout in April 2018, following the 1p payout in November 2017.
The earnings report released by Tesco in October 2018 was not so rosy and Tesco shares fell more than 9% on the 3rd of October 2018. This marked the company’s worst performance since the aftermath of the Brexit referendum.
As a result of problems in the company’s Poland and Thailand divisions, investors were rattled, causing half-year profits to miss expectations. At the time, Barclays cut its full-year profit forecasts for the group by 3 per cent to £2.06bn.
How to Trade Tesco PLC Stock
As one of the United Kingdom’s largest retailers, Tesco has a unique sensitivity to the British economy, and with the Brexit challenges, it will be interesting to see how this will impact the company’s share price. Tesco boss, Dave Lewis, admitted that the Brexit-driven collapse in the British pound sterling (GBP) would push up food prices. He also warned that failure to secure a deal with the EU by the Brexit deadline in March 2019, could lead to higher food prices across the entire UK. Despite this, Lewis emphasized that, even with increased food prices, Tesco would ensure that this does not lead to less choice and poorer quality. Lewis stated that Tesco has a deep and rich supply chain, compared to their competitors. As a result, he has been trying to find ways of mitigating and offsetting some of the costs from the currency to maintain the Tesco standard and variety.
- Product Shortages
Another result of Brexit could be a shortage of food. Three leading UK food academics warned in August 2018 that Brexit could disrupt the supply of food in the UK on a scale “unprecedented for an advanced economy outside of wartime.” The British Retail Consortium also warned of possible shortages on shelves and stated that the UK government will need to prepare for post-Brexit trade with the EU. Dave Lewis of Tesco also expressed concerns about a possible shortage of EU labour required to pick crops in England. To put this into perspective, Food and Drink Federation in the UK stated in February 2018 that 36% of its members would be unable to adapt if they did not have access to EU labour after Brexit.
- Online Pressures
The brick-and-mortar Tesco retailer offers delivery; yet it is a far cry from other companies, such as Amazon, which has basically overtaken the entire space for that type of retailing. Tesco will more than likely not have the ability to overcome this competition. However, Tesco is considered to be a “safe” place to invest as the company has a long pedigree. Beyond that, it is a share worth considering as this is one of the most heavily visited companies in the United Kingdom.
A core component of Tesco’s expansion strategy is its innovative use of technology. In fact, this giant retailer was one of the first to build self-service tills in order to reduce queues. Tesco was also an early adopter of NFC contactless payment card technology. In 2016, Tesco developed PayQwiq, a mobile payment wallet using barcode technology. This allowed for payment using mobile phones and it also supports other contactless mobile wallets, such as ApplePay.
As an investor, it is important to monitor and understand the many factors that can impact Tesco’s performance, especially in short-to-medium-term trading.
Disclaimer: This is a general analysis and not to be viewed or construed as actual trading advice or a recommendation of any kind and just an example of how a particular instrument could, potentially, be traded.
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