Tesco Shares Fall as Overseas Weakness Weighs on U.K. Grocer
(Bloomberg) -- Tesco Plc fell as much as 6.3 percent as profit fell short of estimates in the second quarter amid weakness in its Asian and eastern European business. Despite a squeeze from higher fuel prices, the U.K.’s largest grocer said it’s on track to reach its profit-margin goal for 2020.
- Despite a strong performance in the U.K., Tesco suffered sales declines in its international businesses. Higher fuel costs also weighed on profit, raising concerns among investors despite strong domestic sales growth.
- Tesco’s U.K. sales beat analyst estimates in the second quarter, and its purchase of wholesaler Booker is paying off: The company said savings from the deal are on track and the new unit boosted profit by 97 million pounds ($126 million).
- The grocer’s confidence on its profitability goals shows that Tesco continues to emerge from its years in the wilderness after a massive accounting scandal, brutal price competition in the U.K. and cost pressures from Brexit.
- Tesco is throwing down the gauntlet to J Sainsbury Plc as the rival grocer moves to take over Walmart Inc.’s Asda. Tesco’s new Jack’s discount stores are in their infancy, but the company is cutting prices broadly.
- The decline in the shares was the biggest since June. Tesco shares had risen 12 percent this year through Tuesday’s close. After a runup in the spring, they’ve given back gains in recent weeks.