Can Tesco PLC’s New Management Solve Its Troubles?

A look at Tesco PLC (LON:TSCO)’s new finance director.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

TescoAll the talk has been about Philip Clarke stepping down from Tesco (LSE: TSCO), but let’s take a look back at who’s come in to the supermarket, and if they can help turnaround the company’s fortunes.

New finance director Alan Stewart joins with a reputation as an effective cost cutter from his tenure at Marks & Spencer. This may be useful, but seems to contradict most of the messages from Tesco over the last two years. My reading has been that management felt that a large part of the problem was a lack of investment in products and stores. Particularly when others (Sainsbury’s) were investing for the future and new competitors (Aldi, Lidl) were entering the market.

I also wonder why they are hiring from M&S. There does not seem to be anything particularly exciting in the last results from M&S that would suggest that Tesco would pick it as their hiring ground or need to throw cash at new hires to get them to move.

Tesco is part way through a change in moving from low-value general merchandise to higher-margin clothes and housewares, and presumably Mr Stewart will help with this (though he is on gardening leave until December). He also has turnaround experience having worked with Kate Swann at WH Smith. But I do wonder whether this is a missed opportunity.

Tesco has three, largely unvalued, strings to its bow that I would like to see it clearly delivering on:

  1. Through the Clubcard, it has one of the biggest sets of data on UK consumers. Used well, I see this as an advantage for retail operations (presumably enacted) but also as a way to leverage the data into other products, probably with other partners.
  2. Tesco bank. With the changes we are seeing in digital banking, including such areas as paying in cheques by phone, I see Tesco as well placed to be a genuine challenger bank, if it wants to become one.
  3. IT and distribution services. Amazon has the Kindle, last Christmas Tesco launched its tablet, the Hudl. By all accounts, a very well priced (you could use Clubcard points) and well-specified product. It also featured a ‘buy from Tesco app’. Tesco seems to be in a position to choose to be a significant player in the UK consumer IT market (1,000 Tech support advisors in 200 stores), and a potentially genuine competitor to Amazon in the UK with a distribution network in existence. But it has to make a conscious decision to do this.

I do not see Mr Stewart joining as being a negative. But equally I do not see it as a positive declaration that Tesco is going places or introducing new initiatives. Hiring the Amazon UK FD would have made the market sit up, as I think might a number of other possible choices. The shares seem fully priced for now…

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Jonathan Curry has no position in any shares mentioned. The Motley Fool owns shares of Tesco.

More on Investing Articles

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »

Investing Articles

Are HSBC shares a FTSE bargain? Here’s what the charts say!

There are plenty of dirt-cheap FTSE 100 banking stocks for investors to choose from today. Our writer Royston Wild believes…

Read more »

Three signposts pointing in different directions, with 'Buy' 'Sell' and 'Hold' on
Investing Articles

Just released: Share Advisor’s latest ‘Hold’ recommendation [PREMIUM PICKS]

In our Share Advisor newsletter service, we provide buy, sell, and hold guidance for our universe of recommendations.

Read more »