Defying the gloom elsewhere in the retail sector, supermarket Tesco (TSCO) tops the FTSE 100 leader board on a very strong set of full year results.
The shares up 5.5% to 221.9p as fourth quarter sales top expectations and the company posts a 28% year-on-year increase in operating profit.
These results feel like a culmination of the first stage of Dave Lewis’ turnaround of the group which has involved going back to basics and focusing on its core strengths.
MILESTONE MOMENT
Having returned to the dividend list at the half year stage the company has proposed an annual dividend of 3p. This implies a modest trailing dividend yield of 1.35%.
The company is targeting £200m of synergies from its acquisition of wholesaler Booker and says it has already made a good start in integrating the business following the completion of the deal earlier this year.
Shore Capital retail analyst Clive Black says: ‘With full year 2018 results confirmed, we expect to issue forecasts for the combined business shortly.’
‘Given the content from the full year 2018 results we feel confident enough to stand by our November 2017 recommendation upgrade and reiterate our buy stance on Tesco stock, noting a further fall in net debt to £2.63bn (from £3.73bn),’ the analyst adds.
WHAT NEXT?
AJ Bell investment director Russ Mould says: ‘Lewis deserves significant credit for getting things back on track after a very troubled period but after the dust settles on these numbers the market may start to look at what is next for the business.
‘Top of the agenda will be the integration of recently acquired wholesaler Booker but Tesco also faces the challenge of adapting to continuing shifts in consumer trends.’
