Tesco share price dips ahead of half-year results

on Oct 22, 2014
Updated: Oct 21, 2019

iNVEZZ.com, Wednesday, October 22: Tesco’s (LON:TSCO) share price opened slightly higher this morning but then dipped more than one percent, with investor indecision apparent ahead of the company’s results announcement tomorrow.

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As of 12:35 BST, Tesco’s stock was changing hands at 183.32p – 1.39 percent down intraday – and indicating modest wavering after a two day rally for Britain’s largest retailer.
Yesterday, Tesco’s shares gained 3.5 percent as grocery industry data showed signs of an improving performance despite a continuing decline in the group’s sales ().

Tesco is due to announce its first-half results at 07:00 BST tomorrow. The reporting date was pushed back after an accounting scandal broke last month ().
The news that the company had overstated earnings by £250 million rattled investor sentiment and sent the share price to an 11-year low. Overall, since the revelation of the black hole in Tesco’s finances the stock has lost over 20 percent, taking the year-to-date plunge to just over 45 percent.

Tesco, the darling of the sector during two decades of uninterrupted earnings growth, is expected to report first-half underlying profit of £850 million – around half the £1.6 billion posted in the same period last year. Like-for-like-sales are expected to come in at £30.6 billion sales – six percent down year-on-year.
Along with the results, the UK’s biggest grocer is expected to reveal the findings of its internal probe into the £250 million profit shortfall. According to recent media reports, the firms charged with the task of unearthing the details of the shortfall, Deloitte and Freshfields, have found that a group of employees deliberately ‘misled’ auditors so as to inflate the group’s financial results ().

According to Cantor Fitzgerald analyst Mike Dennis, the best-case scenario for Tesco is that the accounting issue proves to be no more than ‘phasing’, bringing forward profits into an earlier period that will not change future profits, and was an isolated incident that occurred as a result of accident or incompetence. The worst case, according to Dennis, will be a finding of malpractice going back many years, requiring a longer investigation and involving more companies.

Tesco’s new CEO, Dave Lewis, will also face the City with an update on the troubled grocery chain’s turnaround strategy. Some analysts and investors have suggested that the retail giant should roll out a rights issue to replenish its capital. Others expect the CEO to address the balance sheet problems with asset sales, price cuts, lower spending and further property write-downs.
**Analysts on Tesco share price**
Of the 18 analysts projecting 12 month price targets for Tesco for the Financial Times, the median target is 202.50p, with a high estimate of 325.00p and a low of 165.00p.
According to the FT, as of 17 October 2014 the consensus forecast amongst 49 polled investment analysts covering Tesco has it that investors should hold their position in the company.
**As of 12:46 BST, buy Tesco shares at 183.30p.**
**As of 12:46 BST, sell Tesco shares at 183.25p.**


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