Tesco PLC (LON:TSCO)’s Writedowns To Push The Giant Retailer’s Financials Into the Red
Although previous estimates called for Tesco PLC (LON:TSCO) to make write downs in the range of 1-2 billion pounds, the ultimate charge could be in the region of 3-4 billion pounds. The higher impairment is linked to the move by Tesco to shutter 43 stores believed to be underperforming. The company also held back some 49 development projects.
U.K. retail market slowdown
Downturn in the U.K. retail market is increasing putting pressure on retail operators, hurting their sales and profits at a time when they have been ambitiously investing to expand capacity. Amid the U.K. grocery market downturn, shoppers appear to favor smaller convenience stores and online buying, which also heaping pressure on large supermarket operators.
However, Tesco has been closed some smaller outlets, which seems to suggest that the problem in the U.K. retail market is widespread, capturing even smaller operators.
Some other retail businesses that have taken massive impairments include Wm Morrison, which took a 1.27 billion pounds charge in March and J Sainsbury, which also recorded a 628 million pounds charge.
The other challenge facing Tesco PLC (LON:TSCO) is pension deficit, which is expected to have risen to more than 4 billion pounds, according to analysts.
Tesco PLC (LON:TSCO) issued profit warnings, among other things saying that it overstated its profit by 263 million pounds. The company said its full-year profit would not exceed 1.4 billion pounds.
Edit: Original article incorrectly stated that Tesco PLC was down 6% this year, while Tesco PLC (LON:TSCO) is up 30.63 percent this year.
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