Tesco Sells Out of Poland, Attention Shifts To Next Week's Update

Yesterday Tesco announced that it was selling its Polish business to Danish retail group Sailing for £181 million as the supermarket scales back its international presence.

Stocks (1)

Yesterday Tesco announced that it was selling its Polish business to Danish retail group Sailing for £181 million. The agreed deal will include the sale of 301 Polish stores. Tesco said that the move will now allow it to focus on its central European business in in Czech, Hungary and Slovakia where it has a larger market presence. where it has a larger market presence.
Tesco Polska made sales of £1.4 billion last year and an operating loss of £24 million. This deal will earn Tesco £165 million.

The sake of Tesco Polska is part of a wider move that it is seeing Tesco scale back its international operations. Earlier this year the supermarket retreated from Thailand and Malaysia in a deal worth £8 billion.

Prior to coronavirus, Tesco had been facing increased competition in the UK as shopper had turned towards budget chains such as Lidl and Aldi. However, the covid-19 lockdown has seen habits change. Spending on essential items increased however, shoppers are cutting back on non-essentials. With job losses expected to start piling up in the coming months, consumers will almost certainly rein in their spending further.

With this in mind we view the move as positive. The removal of a profit diluting part of the business is a big plus and will make the supermarket’s foundations that much stronger. Furthermore, the additional cash that the deal brings will plump up Tesco’s balance sheet. A prudent move in these uncertain times., particularly if the economic recovery from covid-19 is more drawn out that initially expected.

For further information on where Tesco stands traders will now look ahead to a trading update by the supermarket giant next Friday 26th June. This should provide fresh impetus and could bring Tesco out of the holding channel that it has been trading in for the past 4 weeks.

Chart thoughts
The news initially lifted the share price of Tesco in the previous session, pushing it to a high of 230p before the stock eased back into the close, ending the session at 226p. 
The stocks trades below its 50, 100 and 200 sma on the four-hour chart, a bearish chart. However, Tesco also traded in the horizontal channel that it has been trading in since mid-May, between resistance at 235p and support at 221p



More from Equities

Disclaimer

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

GAIN Capital Singapore Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the GAIN Capital group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), GAIN Capital Singapore Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact GAIN Capital Singapore Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither GAIN Capital Singapore Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

GAIN Capital Singapore Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.

Important Notice:

Cryptocurrencies are not legal tender currency and trading of derivatives on Cryptocurrencies are currently not covered under any regulatory regime in Singapore. Consequently, investors should be aware they do not have protection under the Securities and Futures Act (Cap. 289). Please ensure that you are fully aware of the risks.