Competition among supermarket retailers in the United Kingdom is rife, with many staking claim to being the number one brand within the “Big Four”. One those brands claiming to be the top name is Tesco, but with Tesco shares having seen better days, does the supermarket retailer deserve a place in your portfolio? The following looks closely at the performance of both Tesco and Tesco shares.
A Year of Failure
2013 was arguably one of the toughest years in Tesco’s history, as the supermarket entered a slump in Q1 that they seemingly couldn’t get out of. Budget stores have popped up in locations up and down the country, but it was never thought that these stores could hurt the profits of the supermarket big boys. How wrong they were, as these budget outlets have hit Tesco’s profits hard, reducing the company’s grocery market share to the lowest it has been in a decade. 2013 turned out to be a true challenge for Tesco, something that the brand clearly wasn’t up to.
Thankfully, investors won’t have to look far to see that Tesco has a long-established track record for bouncing back. This situation has seemingly been no different, as the company is putting together plans to revive their fortunes. £1.5 billion has been put forward to rebuild the company’s image by up scaling the look of their flagship stores. It’s a large amount of money and shows that they mean business in turning things around. It also reaffirms to those who own Tesco shares that the company is doing all they can.
By the end of 2013 Tesco had almost 6000 stores spread all around the United Kingdom. When it became clear that the company’s performance had been hit, many analysts though the company would scale back to stop Tesco shares entering free-fall. However, such approach isn’t in the company’s methodology. Tesco is all about expanding business and this won’t change moving forward. New stores are in the pipeline for 2014, showing that Tesco are still one of the biggest supermarket chains in the world despite the drop in profits.
Times may have been tough on Tesco as of late, but that doesn’t necessarily make Tesco shares an investment to steer clear of. Tesco shares took a 20% hit between September 2013 and March 2014, reducing them to a near all time low. The reason for the drop has been pretty well documented, Tesco just haven’t been managed as well as they should have been. But, the price drop may appease investors, as those looking to buy Tesco shares can do so at a lower rate while the brand is still in a state of recovery.
Over the past two years Tesco has seemingly encountered issue after issue, with not much positive news coming along to disperse the cloud that the company is under. However, those looking to invest in Tesco can do so knowing that the brand is doing all it can to get back on the comeback trail. Investment and expansion are on the horizon, but those who wish to buy Tesco shares may be left wondering if it is too little too late.