Full year earnings are due out on Wednesday: analysts predict full year operating profit to come in at £1.2 billion. Importantly, this prediction could beat last year’s performance of £944 million, but for an idea of basis, 6 years ago they were making over £4 billion a year. Indeed the dual negative effect of profit warnings and an accounting scandal dragged the share price to a 14 year low to 137p. During this time, the third largest shareholder, Warren Buffet, called his 4.1% stake his worst ever investment. To say he was critical of the UK’s most popular super market was an understatement. Since then, the subsequent board changes and new CEO look to be showing positive results: the share price has moved higher to 195p and profitability levels have drastically improved. However despite this there does seem to be trepidation among investors due to Tesco’s recent purchase of cash and carry specialist, Booker. Tesco paid £3.7 billion for Booker, possibly regarded as an elevated level in some circles – but importantly the question on investors’ lips will be: could this purchase stun the recovery growth of Tesco going forward?
Jordan Hiscott, Chief Trader
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