Tesco ends sale of 5p single-use carrier bags

Tesco faces £100m legal claim over accounting scandal

1 November

Supermarket giant Tesco is facing a claim for £100m in damages related to its 2014 accounting scandal.

The action was filed in the High Court yesterday by Stewarts Law, acting on behalf of 124 large investors, including pension funds, and is being funded by Bentham Europe, an arm of the US activist hedge fund Elliott, in return for a share of any settlement or financial penalty.

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Stewarts began soliciting investors over a potential claim in September 2014, shortly after Tesco's market value plunged £2bn in a single day after admitting it had overstated profits by as much as £263m, says The Guardian.

That overstatement, the result of supplier payments being booked before they were made, was later increased to £326m and is the subject of an ongoing Serious Fraud Office investigation.

To win the case, the claimants' need to prove deliberate wrongdoing on the part of senior managers. That will be tricky, but is helped by the fact three former executives have been formally charged with fraud.

Sean Upson of Stewarts Law said: "Tesco has mis-stated its accounts, and in particular its treatment of payments from suppliers, to give the appearance of static trading margins. The reality was that those margins were falling.

"Institutional investors were therefore misled when making investment decisions in respect of Tesco."

Fellow law firm Scott+Scott, representing a group called Tesco Shareholder Claims, is also "seeking to bring British investors together to claim billions of pounds in compensation", says the Guardian.

The paper adds: "David Scott, the firm’s managing partner, has said the group will wait to see the results of the SFO investigation before pressing ahead with the claim".

Tesco declined to comment.

Tesco's market share grows for first time in five years

18 October

Tesco shares are rising after industry figures showed market share rising for the first time in five years.

Kantar Worldpanel's keenly watched monthly report revealed sales rose by 1.3 per cent in September compared to the same month last year.

The Financial Times says it's the first time Tesco's sales have recorded an overall rise since March 2015 and the figures will be seen as further evidence that chief executive Dave Lewis's turnaround is "taking root".

The BBC, meanwhile, reports a marginal improvement in market share to 28.2 per cent was the first such increase since 2011.

Established grocery brands have struggled in the past couple of years with the rise of discounters Aldi and Lidl, which are amassing rapid market share and driving food prices every lower.

The German duo recorded the fastest annual growth again in September, of 11.4 and 8.4 per cent respectively.

But the "big four" - Tesco, Sainsbury's, Asda and Morrisons - are fighting back with price cuts, new own-brand lines and a more disciplined focus.

Tesco's sales were boosted in particular by its new, competitively priced "Farm Brands" ranges, Kantar said.

Among its rivals, Sainsbury's continues to perform steadily, with sales falling by just 0.4 per cent, while Morrisons' dipped three per cent, primarily due to store closures.

Asda's travails showed no sign of letting up, with sales slumping by another 5.2 per cent.

Tesco's shares were up 2.3 per cent to 205.6p. October has seen them rise above 200p for the first time since March after the group said it would return a profit of £1.2bn for this year.

Sainsbury's shares were also up, by 2.6 per cent, while Morrisons' dipped in early trading but were also trading positively, by 0.3 per cent, by lunchtime.

Tesco share price soars as sales continue to recover

5 October

Investors have given Tesco's half-year results a rapturous reception by trading its shares up more than 13 per cent to a 14-month high.

The supermarket's share price was above 214p this afternoon, higher than it's been since the beginning of August last year.

This morning's results show that Tesco is making a steady recovery after the supermarket giant reported the biggest losses ever in British corporate history of £6.4bn two years ago.

For the six months to the end of August this year, like-for-like sales at stores open for more than a year rose by one per cent, says the BBC. In the UK, comparable sales rose by 0.6 per cent.

Like-for-like takings have now risen for three consecutive quarters.

Transaction volumes have also boomed, wtih the grocer seeing 200,000 more shoppers thanb two years ago. The growth in footfall has more than offset a six per cent decline in prices, as the fierce war of attrition with discounters Aldi and Lidl rolls on.

At just two per cent, profit margins are nothing like as high as Tesco bosses would like. The store's management has therefore set a new target of increasing margins to four per cent by 2020, in part by cutting £1.5bn from their costs.

As a result of a number of one-off expenses, pre-tax half-year profits fell by 28 per cent to £71m. But operating profits were in line with expectations at £515m, up 38 per cent on last year. Tesco has said it will hit a £1.2bn profit target for the year as a whole.

"This is a fantastic set of results for Tesco, delivering on all aspects of the UK recovery and providing solid future margin guidance," Bruno Monteyne, an analyst at Bernstein, told the Financial Times.

But there is a blot on the landscape. Tesco's pension deficit has doubled to £5.6bn. This is mostly the result of a slump in bond yields and the store insists it doesn't need to provide extra funding.

However, it might be forced to do so if things do not improve in the coming months.

"For now, the ballooning of the deficit is simply a problem on paper," says Laith Khalaf, a senior analyst at Hargreaves Lansdown. "But in March of next year, Tesco undergoes its triennial pension valuation, at which point the deficit might start to harden into a cold hard cash-call for the supermarket."

This could delay a return to dividend payouts to investors after a two-year hiatus, says Jasper Lawler, a market analyst at CMC Markets.

Tesco to be sued by 60 of its own investors

3 October

Tesco is facing legal action from investors who claim to have lost £150m as a result of the chain's 2014 accounting irregularities scandal.

Jeremy Marshall from Bentham Europe, the firm funding the action, told the BBC: "Shareholders were misled by information inaccurately provided to the market with knowledge by management."

He said the suit currently involved 60 large investors, including pension funds from the UK, Europe and the US, as well as general asset managers, but he expects their number to swell once the legal action is filed.

The class action is being led by Stewarts Law and partner Sean Upson said he hopes it "will drive corporate reform" at the retailer.

Tesco has declined to comment on the case.

The development is the latest chapter in a two-year saga that has caused huge embarrassment for the grocer and a dent in its share price.

Last month, the Serious Fraud Office charged three former Tesco executives with fraud and false accounting as part of a continuing criminal investigation.

The inquiry began in October 2014, a week after Tesco announced profits had been overstated by £263m. That figure was later revised upwards to £326m, when the grocer included previous accounts.

Auditors found the inflated figure was the result of the grocery chain booking payments from suppliers before it had been due the money.

Last year, Tesco agreed to pay $12m (£8m) to settle a legal action from US shareholders that claimed that the accounting irregularities inflated the supermarket's share price.

Tesco could face Commons over £6bn pension black hole

26 September

Tesco could be drawn into the parliamentary investigation into workplace pension problems after analysts predicted its deficit could be greater than thought.

Earlier this year, the supermarket reported it had reduced the massive black hole on its final salary pension scheme from £3.9bn to £2.6bn, raising the cash through a number of big asset sales, says the Daily Telegraph.

But analysts at Exane BNP Paribas forecast the group's half-year results, to be announced next week, will reveal the shortfall has ballooned by £3.3bn. Tesco's own in-house broker Barclays estimates it has widened by £3.1bn.

The deficit, ranked among the top five in the country, is much larger than its peers because Tesco kept its generous final-salary scheme open for much longer. It eventually closed the fund to new contributions this year.

So-called "defined benefit" schemes, which promise a set inflation-linked payout to members, have come under pressure in recent years because people are living longer.

Most firms have long since closed such schemes to new members, but their combined deficit still stands at an astonishing £935bn by some estimates.

Adding to the problem are ultra-low interest rates over the last couple of years and bond-buying by central banks, which have both pushed down the yields on government debt - the safe investment most pension fund trustees use to keep pace with payout demands.

Concern has grown in the wake of the likes of the BHS collapse, which could leave its pensioners facing reduced payouts.

The Times asked Labour MP Frank Field, the chairman of the parliamentary pensions committee, if he planned to call a representative of Tesco before the new investigation into the issue. "I might well do," he replied.

He also told the Telegraph that the grocer "couldn't keep kicking the can down the road" and that he hoped to see "proactive action taken by the Pensions Regulator to promise that employees get a stake in assets that Tesco has been selling".

There has been criticism of listed firms that are currently paying five times as much in dividends to investors as to fund their pension deficit.

However, that doesn't apply to Tesco as it hasn't paid a dividend in two years. It currently pays £270m a year to fund its pension shortfall, an amount which might increase next year after its triennial negotiation with pension trustees.