Tesco has been firmly off the ‘buy’ lists of many for a long time.
Once a darling of investors and reliable dividend player, the past few years have seen shareholders endure an accounting scandal, an unsuccessful international expansion attempt, a very public row with Marmite-maker Unilever and a Christmas fiasco which saw the supermarket send shoppers rotten turkeys.
It’s been a torrid few years for the retailer, which is also battling to stave off the increasingly popular discount rivals nipping at its heels. Tesco has managed to retain its dominant position, but its market share has slipped to around 28 per cent from 31 per cent a decade ago.
As recently as December, some 43 per cent of analysts rated the stock a ‘sell’ and shares are 212¾p – still less than half of their November 2007 peak of 492p.
But the retail giant is back on analysts’ radars after its £3.7billion merger with cash and carry group Booker finally went through last week.
Barclays was one of the first to set out its stall. It has reinstated an overweight rating on the stock, judging it better value than others, with a target price of 225p.
Analysts at the bank explained that, with the merger now complete, ‘the market can focus on the merits of the two businesses and the opportunities for collaboration’.
Tesco finally reinstated a dividend at the end of last year, to the delight of many. It’s a sign that the firm feels confident enough about its cashflow to start giving some money back to shareholders.
The business, which has a market value of £20.8billion, gave a buoyant update at the start of the year. It saw some 58million customer transactions and 770,000 online grocery deliveries in the key Christmas week, with UK sales up 2.1 per cent in the 19 weeks to January 6. But sales were down by 11.1 per cent in Asia and up just 0.6 per cent in Central Europe.