Shore Capital says that news that Tesco (LON:TSCO) is launching a new discount chain next week is ‘exciting,’ Citywire reports. The comments came after it emerged this week that Britain’s biggest supermarket will confirm the launch of its new discount chain Jack’s on Wednesday.
Tesco’s share price rose in the previous session, adding 0.42 percent to close at 237.80p. The advance was largely in line with gains in the broader UK market, with the benchmark FTSE 100 index gaining 39.82 points to end trading 0.55 percent higher at 7,313.36, finding support in blue-chip miners and tobacco stocks. This morning, the shares have fallen 0.67 percent in early trading, as compared with a 0.04-percent fall in the Footsie.
ShoreCap upbeat on new chain
Citywire quoted Shore Capital’s analyst Clive Black as saying yesterday that the arrival of Tesco’s new discount chain could ‘move the dial’ for Britain’s biggest supermarket which would not “embrace a potentially major piece of work for it to be marginal”.
“Hence, Jack’s potential arrival does bring with it a modicum of excitement,” the analyst added. The FTSE 100 grocer is preparing to launch the chain amid stiff competition in the UK grocery market, with German discounters Aldi and Lidl pressuring profits at the country’s ‘Big Four,’ and rivals Sainsbury’s (LON:SBRY) and Asda working toward a merger.
Blue-chip supermarket ‘still a buy’
The comments came as ShoreCap reaffirmed its bullish stance on Tesco. Black noted that the supermarket’s shares were still a ‘buy’ despite the ‘rather fulsome near-term stock rating’.
“We see the UK as stable and now generating growing operating cashflow […] Ireland looks increasingly well set,” the analyst continued, as quoted by Citywire, adding that all in all, “a business where cashflow, earnings, dividends, and returns look well set for the medium-term”.