Oct 17, 2020
Tesco needs evolution not revolution
A 91 per cent rise this year in the cash burning retailer's stock saw it overtake Tesco as the UK's most valuable grocer in late September, despite it having a weekly online order capacity one-quarter of the size. The debate over Tesco Online's margins however, does perhaps miss one wider point. A more speculative suggestion from UBS is that Tesco could look to monetise its online platform by allowing brands to pay to bump themselves up to the top of the search function. Tesco doesn't need a digital revenue boost to appear cheap though, although investors stung by value traps over the past decade will rightly be weary of its current valuation of 12 times its expected operating profits for the year. Under former boss Dave Lewis, Tesco put an accounting scandal firmly behind it, shed its non-core business and focused on cash returns.
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