Tesco PLC’s Profit Beats Market Forecasts

Tesco PLC (LON: TSCO) profit declines but by less than the 10% expected.

Mark Stones

Mark Stones (TMFMumbojumbones) joined The Motley Fool in 2014 and initially worked as a writer for Fool.co.uk, before joining the Fool’s analyst programme. Mark earned a BA in English from Loughborough University. Although he spends more time reading annual reports than Russian literature these days, he still appreciates a novelist’s antipathy toward the accepted view, which is a useful attitude when trying to sniff out hidden gems on the stock market. His approach to investing has been largely influenced by the principles of Warren Buffett and Peter Lynch. He also takes a special interest in the work of healthcare companies. Outside of investing, Mark plays guitar, enjoys good writing and has a guilty passion for combat sports.

Published 16 April, 2014 9:27 am BST

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Shares in Tesco (LSE: TSCO) added 12p, or 4%, to 298p during early trade this morning, after the UK’s largest grocer unveiled a decline in profits for the second year running.

The decline, however, wasn’t as bad as the market feared. Group profit fell to £3.3bn from £3.5bn in 2014, a fall of 6% against a 12% fall the year prior, impacted by a “weakening” UK grocery market and challenging trading conditions overseas.

Tesco added that like-for-like sales, excluding VAT and petrol, were down 3%.

The full year dividend was maintained at 14.76p with 2.1 times earnings coverage.

The chief executive, Philip Clarke, commented:

“We are transforming Tesco through a relentless focus on providing the most compelling offer for our customers. Our results today reflect the challenges we face in a trading environment which is changing more rapidly than ever before. We are determined to lead the industry in this period of change.”

After this morning’s price movement Tesco shares may trade on a forward P/E of 11.

Of course, the decision to ‘buy’ — based on today’s results, the wider prospects for the grocery sector, or perhaps a belief that the shares will slide further yet into bargain territory — remains up to you.