Tesco is “executing well” ahead of the group’s preliminary results released in April, according to Shore Capital, which held its hold rating on the stock.
Specifically, Tesco is showing good capital discipline with an allocation framework which is funding an attractive annual dividend and recurring share buyback, said the broker.
Shore Capital notes the news story which broke over the weekend regarding the FTSE 100 retailer potentially looking to dispose of its banking arm.
Although the speculation is “not helpful” to the bank’s management and wider team, Shore Capital believes Tesco is not in a position where it needs to dispose of its bank.
However, should it decide to get rid, it would represent a further simplification of Tesco from a global retail powerhouse into a UK-focused grocer.
The broker also suggests that any inbound offer for the group’s Central European operations would be met with warm interest from the board.
Tesco has made efforts in delayering its management structure so far this year, which Shore Capital believes is creating “hard yards” to create resources to maintain price competitiveness in the tough UK market as well as support its bottom line.
Shore Capital also believes talks of expanding its rapid delivery service, Whoosh, to 800 outlets from 600 outlets, will unlikely move the dial on 2024 earnings.