Shares digital

Success in Central Europe and Asia may have been seemingly easy to come by for retail behemoth Tesco (TSCO) but things are looking less rosy on the other side of the pond according to analyst examinations of its US business Fresh and Easy. Mike Dennis of Piper Jaffray, whose research is based upon checks with US suppliers, believes that the stores sales are running 70% below budget. This has led him to slash his second half sales forecast to $30 million compared with previous estimates of $100 million.

Tesco’s decision to appoint an American Jeff Adams, the CEO of its successful Thai business, as the second in command is perhaps an indication that the group recognises that its concept is not as appealing to US tastes. The hard pressed US consumer may be more attracted to cheap prices than Tesco’s convenience store concept.

Meanwhile the company has been trailing the competition in the UK where it has been a victim of Morrisons’ (MRW) revival. Dennis believes that this has been exacerbated by a ‘relatively poor performance by Tesco.com and non-food’. Its results are due in just over three weeks on 15 April and until then the shares, which have already dropped around 25% over the past four months to 370p, will be under some pressure.

Shares says: In the short term the shares are likely to be a difficult market

by: John Marshall

The writer holds shares in this company