Sunday, December 22, 2024

Tesco may be a stock to add to your shopping list if you are seeking more exposure to British shares

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The shares stand at 330.5p which is 12.8 per cent higher than at the start of the year, despite this week’s stock market rout.

However, the price is still only 5 per cent above its level of a decade ago when the supermarket chain was engulfed by an accounting crisis that threatened its future.

The subsequent somewhat lacklustre performance of the shares belies the £21.9billion FTSE 100 company’s progress since the scandal. There has been a turnaround, first under David Lewis, and then his successor, Ken Murphy.

Will Tesco keep growing?

This ‘pre-eminent grocer of the British aisles,’ as it is called by Richard Hunter of broker Interactive Investor, is now luring customers away from rivals at a faster rate than at any time over the past two years. This is despite competition from the fast-expanding German discounters Aldi and Lidl.

What is its market share?

The company heads the supermarket league with a 27.7 per cent slice of the UK grocery business. Sainsbury’s takes second place with a 15.3pc share. Asda comes third with 12.7 per cent.

How crucial is Clubcard?

This loyalty scheme is integral to Tesco’s allure. Food price inflation has dropped, which should mean that shoppers are less fixated on getting a bargain. But 22m UK households with a Clubcard are still benefiting from reductions in-store and online that are available only to them.

What’s its next big move?

A push to entice the affluent foodie clientele of Marks & Spencer and Waitrose who dine on restaurant-type meals, but at home. Tesco aspires to increase sales of its Finest range from £2billion-a-year to £3billion by upgrading its more expensive Finest range.

Any other initiatives?

Murphy will want action soon on the rising wave of shoplifting: theft from Tesco and Sainsbury accounts for 40 per cent of all cases.

Millions have been spent on body cameras and protection screens for staff and security to deter offenders. But Murphy remains incensed about attacks on his workers and will be hoping that the new Crime and Policing Bill brings in stronger measures to tackle the crime wave.

Should I buy the shares?

This may be a share to add to your shopping list if you are seeking more exposure to British shares.

Tesco has been buying back its shares and intends to spend a further £1billion over the next year on this strategy. Share buybacks should boost the share price of a company as they decrease the total number of shares in issue.

Meanwhile, the majority of analysts rate Tesco a ‘buy’ with an average target price of 338p. There is also the lure of its 3.78 per cent dividend yield.

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