Tesco expected to post significant write-offs
On Wednesday, Tesco publishes its annual results for the year ending February. Last week, Tesco confirmed it could post a writedown far in excess of previously touted figures of up to £1bn; analysts are now forecasting that pre-tax losses could be as high as £5bn.
“The announcement will be a horror show,” said Clive Black of Shore Capital, reported in the Financial Times. “Within a generation Tesco has gone from a reasonably robust British grocer to the world’s third largest supermarket group. Now it must reorder its balance sheet and focus on reducing its costs.”
Borja Olcese of JP Morgan Cazenove believes Tesco may be forced to raise money to soothe the pain. “We find it difficult to believe that Tesco can continue to drive volumes, improve margins and pay down debt simultaneously without raising capital,” he remarked to The Times.
“The most obvious solutions Tesco could opt for in order to strengthen its balance sheet are…either in the form of asset disposals or a potential share placing.”
Despite a troubled two years characterised by scandal and losses, Tesco retains a 29 per cent share of the UK grocery market at present.