Tesco’s share price is all over the place. Here’s why
Shares in Tesco were up more than two per cent in early trading, brushing off the shock of a larger than expected loss of £6.38bn for the year.
Despite the massive loss – the largest ever recorded by the supermarket and the sixth biggest of any UK company – investors initially remained confident in the ability of boss Dave Lewis to turn around the retail giant.
As the details of a horrific year were sifted through, the full picture may not be as rosy as first suspected, with shares diving two per cent by midday, and closing five per cent down.
Efforts by Lewis to aid the recovery have buoyed confidence since the start of the year while today's results draw a line in the sand between the dynasties of Lewis and former chief executive Philip Clarke.
The supermarket took a £7bn writedown across the business, with the large majority coming from its property portfolio, essentially clearing the decks in some spectacular kitchen-sinking. That's a one-off, Tesco say, and on the balance sheet rather than in cash terms. Not including writedowns, Tesco's profit on a trading basis came in at £1.4bn while like-for-like sales were its most positive in four years.
"These figures are absolutely huge – nearly the biggest loss in UK corporate history. However, they need to be understood in context. They relate mostly to asset write-downs rather than poor trading performance. Underlying trading performance for Tesco has actually not been too bad in recent months. In many ways Tesco has decided to make these losses now rather than later," explained Warwick Business School's Crawford Spence.
Tesco's share price has risen 24 per cent since the start of the year since hitting an 11-year low in December. See the rise and fall of Tesco shares over the last five years.
Meanwhile, analysts have been less confident about Tesco's prospects at turning around sales, which will be an arduous long-term process.
