Retailer Tesco Starts Financing: Announcing Interim Dividend Reduction And Investment Spending Cuts

Tesco announced that the mid term dividend was reduced by 75%, with only 1.16 pence per share.

In order to control costs, expenditure has also been cut by 400 million, and total expenditure is controlled within 2 billion 100 million pounds.

This earnings warning reveals the continuing decline of Tesco performance. It is estimated that the annual profit of Tesco will reach 2 billion 400 million -25 billion this year, down 25% from last year, which will be the third year of Tesco's performance decline.

Previously, Tesco internal staff adjustment has been frequent.

In July this year, Tesco's original CEO Philip Clarke, which had suffered the worst performance in 40 years, resigned from former Unilever executive Dave Lewis and took up the post of CEO in October 1st.

On the premise that performance continues to deteriorate, Tesco announced last Friday that Dave Lewis had taken the lead in September 1st and formally took over CEO.

Analysts said that the control of dividends and investments gave Dave Lewis more flexibility to adjust Tesco's performance, hoping to regain its economic vitality as the world's third largest retailer through cost control.

In the years after Tesco's original CEO Terry Leahy took charge of the company, Tesco was already on the decline. At that time, the share in the local market had started to drain, and the successor Philip Clarke invested 1 billion pounds to reverse it, but it still failed. Tesco first made a profit in January 2012.

When Philip Clarke left in July this year, Tesco again issued a profit warning.

So far, it has been the third profit warning issued by Tesco in three years.

Analysts said that Tesco is likely to adopt a price war strategy when it reinvigorate its performance, and it will also be able to handle assets outside the UK area, and the impact on the industry has begun before Tesco revival.

From the industry point of view, the price of rival Sainsbury and Morrison supermarket has decreased by 4.5% and 4% respectively, as Tesco will adopt price war to cope with industry changes.

Because of Britain

Shopping habits are changing, and local supermarkets have to go through fierce competition in the industry. Whether they are selling at discount prices or selling high-end supermarkets targeted at high-end customers, Tesco has been defeated by rival retailers such as Hardi (Aldi) and Liddell (Lidl) in this competition.

Data show that since Philip Clarke took office in March 2011, the market share of Tesco has decreased from 30.7% to 28.8%.

The location of Tesco is in the middle end. The large supermarkets in the suburbs are facing fewer and fewer customer needs. Consumers tend to go to nearby convenience stores or even online shopping rather than lingering in large supermarkets.

In July this year, Tesco converted the land that had been planned to open a comprehensive supermarket into a residential building and made a real estate project.

In overseas markets, Tesco has also suffered a lot of losses.

In 2013, Tesco announced its withdrawal from the US market due to poor management and closed down its 199 supermarket chains in the United States, Fresh&Easy.

In the Chinese market, Tesco has been acquired by Huarun Wanjia, and Tesco has injected Chinese business and cash into joint ventures with Huarun, and Tesco has only 20% of the total.

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According to analysts, the interim dividend reduced by Tesco will save the company 800 million -9 billion pounds, and the reduction of 400 million pounds on IT and store renovation will also bring more space to reduce product prices for Lewis and win back the hearts of consumers.

In view of the future development of the company, Tesco will face multiple choices.

According to the analysis, in addition to price cuts, the future Tesco is likely to adjust the storefront structure to provide different shopping forms for consumers with different needs, and will attack the fields of low, medium and high levels respectively.

Brand image is likely to be reestablished after the new CEO takes office. As for the cost and the number of employees, there may be a decline in the number of international brands, and international businesses are more likely to be sold or stripped.

According to Tesco's current performance and personnel changes, some analysts say it will bring many variables to Tesco, and senior management will face a shuffle.

Although a series of changes in Tesco made the industry suspicious, shareholders complained to Tesco at the annual general meeting, but at this time they showed a wait-and-see attitude towards Tesco.

A shareholder who just raised his shareholdings said he did not expect Tesco to complete the pformation as soon as possible. He knew that the road to recovery of Tesco would take many years and share prices would also face corresponding pressure.