TSCDY Tesco PLC (PK)

Tesco Earnings Preview:

Britain's largest retailer, Tesco PLC (TSCO.LN), reports half-year results before the market opens in London on Wednesday. Here's what you need to know:

EARNINGS FORECAST: Analysts polled by FactSet expect underlying per-share earnings of two pence down from roughly eight pence a year earlier.

REVENUE FORECAST: Analysts expect revenue excluding VAT to be GBP27.13 billion compared with GBP30.47 billion a year earlier.

WHAT TO WATCH:

U.K. SALES: Data from industry body Kantar Worldpanel shows that for the second-quarter period Tesco's sales have dropped 1% but analysts at Nomura note that with less space, the numbers should indicate that "underlying trading has continued to accelerate." The company's share price has dropped 14% in the past three months alone and investors will be closely watching the latest results for signs the business is sustainably turning a corner.

MARGINS: Bernstein analysts expect Tesco's results to show that it had laid the groundwork to raise U.K. margins by 2% in the next financial year. "We do not expect explicit guidance for next year margins but confirmation of some of the very large cost savings they undertake," said Bernstein analyst Bruno Monteyne, adding that he expects more details on how current cost-cutting endeavors are playing out, and how Chief Executive Dave Lewis's push to rationalize Tesco's product range is going.

ACCOUNTING INVESTIGATION: The U.K.'s Serious Fraud Office launched an investigation into Tesco a year ago after the retailer revealed it had overstated profits by 263 million pounds ($399 million). The investigation is expected to be completed by the end of 2015, but it's still unclear whether it would end in a settlement, criminal charges, a deferred prosecution agreement, or something else.

FURTHER DISPOSALS: Chairman John Allan recently indicated that Tesco is done with making overseas disposals after the company last month agreed to sell its South Korea business, Homeplus, for $6.1 billion in cash, but management commentary will indicate if there's more firepower needed to jumpstart the core U.K. business. Bernstein expects smaller deals like the sale of Tesco Mobile, undeveloped land, Dobbies, Tesco's underwriting business and stores in Slovakia and Turkey but says larger transactions like selling the Poland and Hungary businesses seem unlikely.

DUNNHUMBY: Tesco early this year hired Goldman Sachs to explore options for its data analytics Dunnhumby unit. But the company hasn't yet found a confirmed buyer and Tesco may choose to hold onto the business following the sale of its Korea arm now that the necessity for a fire sale has been alleviated.

 
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October 07, 2015 00:17 ET (04:17 GMT)

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