Tesco PLC (LON:TSCO), the multinational general merchandise and grocery retailer based out of England, is likely to report increased sales this quarter. This is good news for the business that was recently struck by a major accounting scandal. There have been concerns about Tesco’s pension deficit as well.
6 big investors have claimed to lose £150 million due to the profit overestimation of Tesco in 2014. Many of them are thinking of filing a lawsuit as well against the business, according to reports. Incidentally, Tesco has had to pay $12 million as settlement for American Depositary Receipts.
Tesco Fights Back
Tesco is the largest supermarket group in the United Kingdom. The Chief Executive, Dave Lewis, has been busy off late, turning the business around. Many of their units in other countries have been sold off, particularly those that were deemed non-core for Tesco. The supplier deals were complicated, and they contributed to the company’s profit overestimation of £326 million. That has been simplified.
Tesco has cut costs as well. The business is also successfully fighting the discount retailers from Germany that have managed to create quite a decent a market presence in the UK, taking business away from Tesco and other British companies.
Dave is describing the results as “strong progress” and says he wants to build profitability “in a sustainable way”. He further adds that the business has become more competitive in the last couple of years. Prices, for instance, have come down by about 6 percent, and they have also managed to improve the range and service quality.
Analysts are saying that Tesco (LON:TSCO) might report a sales increase of 1 percent, which is up from the 0.6 percent of last year’s same period. It would also be higher than the second quarters reported growth of 0.3 percent. This will also be the third consecutive quarter when Tesco sees like-for-like sales growth.
Profits Could Still Be Volatile
The profit margins might still be volatile, though, as the UK is going through a price war that is making the grocery businesses lose margins. Plus, the company has also invested money in new ranges, such as the “Farm Brands” that is likely to bring down the margins. It could, however, pay dividends in the long-term.
The Brexit decision might also put pressure on the business as the pension deficits are likely to balloon. Tesco’s stock has though gone up consistently over the last week.