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Tesco share price: what to expect from first-half results

Tesco will release interim results on Wednesday 7 October, 2020. This will cover the six months to late August. It will be a big day for Tesco and for its new chief executive Ken Murphy, who only took the helm six days ago when he brought an end to Dave Lewis’s six-year reign. Murphy, previously…

  • Tesco is set to report broadly stable revenue in the first half (H1) of its financial year but profits are expected to plunge as the coronavirus pandemic takes its toll
  • Tesco’s new chief executive Ken Murphy took over just days ago, with the results setting the stage for him to outline his vision and strategy for the grocer
  • Tesco shares have failed to bounce back from the sell-off in March and trade 17.5% lower than the start of the year
  • Brokers are bullish on Tesco shares and see considerable upside to the current share price

When are Tesco’s first half results?

Tesco will release interim results on Wednesday 7 October, 2020. This will cover the six months to late August.

Tesco first half preview: what to expect?

It will be a big day for Tesco and for its new chief executive Ken Murphy, who only took the helm six days ago when he brought an end to Dave Lewis’s six-year reign. Murphy, previously an executive of pharmaceutical retail giant Walgreens Boots Alliance, will be looking to open a new chapter for the UK’s biggest supermarket chain as the industry goes through significant change.

He has already had some help from his predecessor, who agreed to sell off Tesco’s Asian business earlier this year as part of a strategy to cut down debt and turn Tesco from an over-stretched global retailer to an industry leader in the UK, Ireland and Central Europe.

This plan is unlikely to change, leaving Murphy to build on the existing strategy. However, he will still have tough decisions to make as he navigates the grocer through the pandemic and the tough economic times that lie ahead, and responds to the dramatic changes in the market.

At the top of the agenda for investors on Wednesday is when the £8 billion from the sale will be in the bank and what Tesco intends to do with the proceeds. The supermarket chain has said £5 billion will be returned to investors through a special dividend, twinned with a share consolidation.

The deal to offload around 2000 stores in Thailand and Malaysia is expected to be completed before the end of 2020. A £5 billion special payout would be worth around 51p per share based on the number of shares currently in issue. The ordinary interim dividend, which has remained intact during the pandemic, is expected to be paid.

Other news to look out for are updates on plans for Tesco Bank. Although the unit has five million customers, it is seen as another asset that could be sold off as part of Tesco’s intention to refocus the business. However, Tesco has had to increase provisions for bad debt at the bank in the current climate and it is not clear how much appetite there is among buyers right now. Tesco sold off its mortgage book to Lloyds last year.

Murphy will take the opportunity to put his vision for Tesco to investors this week and outline his ambitions for the firm. But there is a number of hurdles that he will have to overcome. The pandemic is swiftly changing the way we shop. Costs are rising but low prices will remain key to attracting customers considering the poor economic outlook.

Brexit remains up in the air, leaving questions over supply chains. Plus, a number of rivals could become more of a threat considering Ocado and Marks & Spencer (M&S) have teamed up, Asda is under new ownership, and Amazon is still thought to be considering making its big entry into the market, possibly by buying Morrisons or Sainsbury’s.

Tesco first-half earnings: what does the City expect?

The industry has struggled to capitalise on the increased demand they have seen this year. For example, sales increased 9.2% in Q1 and like-for-likes (LfL) rose 8.2% – with online sales up by almost half. But Tesco is still forecasting annual operating profit to be ‘at a similar level’ to last year.

The consensus for H1 further demonstrates this point. Revenue is forecast to remain broadly flat year-on-year (YoY) but earnings and profits are expected to plunge.

One of the main reasons for this is that the pandemic has also pushed up costs. The shift online has been accelerated, and this erodes the industry’s already wafer-thin margins. The cost of providing an online service is much higher, but the prices people pay for goods remains the same.

Plus, Tesco and others have had to hire more staff to cope with demand and introduce new equipment to keep staff and customers safe. What’s worse is the fact supermarkets will have to keep prices low to attract customers, especially if unemployment rises as expected this year.

Tesco first-half earnings consensus

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Broker news

Donald Trump blasts ‘fools’ who oppose good Russian ties

US President-elect Donald Trump has posted a progression of tweets censuring the individuals who contradict great relations with Russia as “‘dumb’ individuals, or nitwits”.

Mr Trump promised to work with Russia “to comprehend a portion of the numerous… squeezing issues and issues of the WORLD!”

His remarks came after an insight report said Russia’s leader had attempted to help a Trump race triumph.

Mr Trump said Democrats were to be faulted for “gross carelessness” in permitting their servers to be hacked.

In a progression of tweets on Saturday, Mr Trump said that having a decent association with Russia was “no terrible thing” and that “lone “idiotic” individuals, or simpletons, would believe that it is awful!”

He included that Russia would regard the US increasingly when he was president

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Broker news

Bulls and Bears Took on More Currency Exposure in Week Through January

he most striking improvement among theoretical situating toward the finish of a year ago and the primary session of 2017 is not that modification were little. There was just a single gross theoretical position modification of more than 10k contracts. With sterling apparently not able to maintain even humble upticks, the bears added 13.1k contracts to the gross short position, lifting it to 120.2k contracts.

Or maybe, it is eminent that examiners for the most part added to positions, long and short, as opposed to close positions at the very end of the year. Examiners added to net long outside cash prospects positions, aside from in the Japanese yen and Swiss franc where 2.6k and 2.5k contracts were exchanged separately. Examiners likewise added to gross short positions. Here there was just a single exemption, the Japanese yen. Despite the fact that the dollar shut comprehensively higher in front of the end of the week, every one of the monetary forms we track here, spare the Mexican peso, picked up against the dollar in the three sessions since the finish of the CFTC reporting period.

Every once in a while it is helpful to review why many market members take a gander at the theoretical situating in the cash fates advertise. It is not that the outside trade is essentially a prospects showcase. It is principally an over-the-counter market in which every day turnover midpoints in abundance of $5 trillion a day.

Trade exchanged monetary forms and alternatives represented around 3% of the normal day by day turnover as indicated by the BIS study. Be that as it may, past reviews have discovered some contemporaneous connection between’s market heading and net position changes. We think it additionally offers knowledge into a specific market section of pattern supporters and energy brokers. It is not by any means the only device, yet one of a few data sources.

One ramifications of this is albeit theoretical positions in the money fates market are moderately extensive, it is still little contrasted and the money showcase. Along these lines, it is difficult to see the genuine essentialness of a record vast position, as though there is some market top. At some point, examiners are not driving the costs, possibly there is another fragment, national banks, enterprises, as well as genuine cash that is more essential at any given minute.

We invest some energy taking a gander at gross positions instead of just net theoretical positions, which is the more customary approach. We think a more granular look is frequently fundamental. There is a distinction between short-covering, for instance, and new purchasing, however it appears to be identical in the net. Additionally, the gross position is the place the introduction is not the net position. A net position of zero does not mean the market is nonpartisan. Net positions could be huge, which implies a short press or a negative stun could in any case troublesome. The positions that must be balanced are captured in the gross measure not the net figure.

We find numerous customers are likewise keen on theoretical situating in the US Treasuries and oil. The net and gross short theoretical Treasury position has swelled to new records. The bears added 23.8k contracts to the as of now record net short position, lifting it to 616.2k contracts. The bulls attempted to pick a base and added about 20k contracts to the gross long position, which now remains at 471.2k contracts. These modification prompted to a 3.8k contract increment in the net short position to 344.9k contracts.

The bulls delayed in the oil prospects toward the finish of 2016. They exchanged short of what one thousand contracts, leaving 608.1k gross in length contracts. The bears added 4.1k contracts to the gross short position, giving them 168k. These conformities trimmed the net long position by very nearly 5k contracts to 440.1k.

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Broker news

3 ways to profit in the ‘year of the dollar’

In December, the Federal Reserve raised loan fees for the second time since the Great Recession and included the desire of a 2017 financing cost climb to its gauge. Furthermore, only a couple days prior, the abundantly anticipated minutes from the most recent Fed meeting demonstrated the most hawkish tone from the national bank in two years.

In the meantime, Europe has been dove into political turmoil after a year ago’s Brexit vote and the later abdication of Italy’s leader. Somewhere else, the Bank of Japan proceeds down the way of negative rates and forceful security purchasing.

Put it all together, and it isn’t astounding that the U.S. Dollar Index is up against 14-year highs.

Speculators may have missed so much discussion on account of babble about the Dow Jones Industrial Average at the end of the day almost hitting 20,000. Be that as it may, paying little respect to your assignment to stocks or your venture skyline, this sort of huge picture incline in the dollar implies right now is an ideal opportunity to position your portfolio to benefit and, maybe most critical, to keep away from a portion of the pitfalls that can originate from a solid local cash.

Here are a couple ideas dollar exchanges ought to consider:

Residential plays over multinationals

There’s a considerable measure of seek after shopper stocks in 2017 on account of an enhancing work market and any desires for a jolt under a GOP-controlled Congress and President Donald Trump. In any case, remember that not all retailers are made equivalent especially those with abroad operations that are adversely affected by the wide dissimilarity in monetary standards at this moment.

For example, retailer Wal-Mart Stores Inc.(WMT) said troublesome money trade rates shaved very nearly 2.5% off profit for each partake in the second quarter of 2016. On the other hand consider that in the monetary final quarter of 2016, athletic attire goliath Nike Inc.(NKE) saw its income development cut down the middle because of forex weights, from 12% year-over-year in consistent cash measures to only 6% including real money changes.

To take advantage of the “reflation” exchange that numerous financial specialists are counts on in 2017, you need to represent the headwinds that a solid dollar are making for multinationals at this moment. The most ideal approach to do that is to consider customer plays that do by far most of their business here in the U.S. – for example, Foot Locker Inc.(FL), which has been an uncommon splendid spot in retail throughout the most recent couple of years.

Supported money ETFs

Obviously, in the event that you need a steady portfolio, you can’t just purchase just local centered values. Geographic expansion is similarly as imperative as enhancement crosswise over parts and resource classes. Such a large number of financial specialists keep on holding worldwide plays in light of a legitimate concern for a balanced portfolio, regardless of the possibility that it implies battling a daunting struggle as a result of a solid dollar.

The uplifting news, notwithstanding, is that you don’t need to leave yourself to torment through a solid dollar and a powerless euro when you put resources into Europe. Nor do you need to stress over the yen-dollar conversion standard when you put resources into Japan. That is on account of there’s an entire group of cash supported ETFs to permit financial specialists to put their cash in outside business sectors yet keep away from forex issues.

Consider that Japan’s Nikkei 225 file is up around 25% from its July 2016 lows. The WisdomTree Japan Hedged Equity Fund(DXJ) is up 35% in a similar period on account of assurance from forex issues and a somewhat better-performing rundown of stocks – while the non-supported iShares MSCI Japan ETF(EWJ) is up only 10% in a similar period because of battling a difficult task against a solid dollar.

In the event that you need to differentiate your portfolio comprehensively, you ought to consider supported assets that incorporate the Japan-centered DXJ, the WisdomTree Europe Hedged Equity Fund(HEDJ) to play Europe or the iShares money Hedged MSCI EAFE ETF (HEFA) for developing markets.

Dollar list ETF

In the event that you are searching for an immediate play on a rising dollar as opposed to putting resources into stocks, figuring out how to exchange remote trade can appear like an overwhelming undertaking. Gratefully, there’s the PowerShares DB US Dollar Index Bullish Fund(UUP).

This ETF is attached to the U.S. Dollar Index, which is a measure of the greenback against a wicker container of other worldwide monetary standards including the yen and the euro. It’s a straight money play, however that doesn’t make it straightforward or hazard free. In the event that the dollar debilitates, you’ll lose cash similarly as though you’re putting resources into a stock that has fallen on difficult circumstances. Furthermore, obviously, PowerShares takes a little cut of your speculations en route that indicates 0.8% yearly, or $80 a year on each $10,000 contributed.

Still, in the event that you need to conjecture on the dollar or support against a solid U.S. cash keeping down other worldwide ventures on your rundown, it’s maybe the least demanding approach to do as such for generally financial specialists.

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