Stock Analysis & Ideas

Tesco starts share buyback amid strong performance

Story Highlights

With the challenging market conditions starting from COVID-19, to declining consumer spending from inflation, UK retailers have seen it all. Tesco PLC appeared as a leader of the gang. But, will the investors also get the advantage?

Tesco (GB: TSCO) has begun a share buyback which was announced after strong year-end results three months ago.

By April 2023, the company expects to buy back a total of £1.05 Billion worth of shares.

The company has appointed HSBC to repurchase £150 million of shares, after already returning £300 million to shareholders in the previous financial year.

Despite the ongoing cost of living crisis in the UK, Tesco shares were in a more comfortable space in the last year compared to its competitors, J Sainsbury’s (GB: SBRY), and Ocado Group (GB: OCDO).

Tesco is among the leading retailers in Europe, and also offers services such as banking and a mobile phone network.

Good sales numbers & buyback on track

The company posted good sales numbers for its first quarter in May’22. The retail sales were at £13.5 Billion, up by 10% from the pre-COVID numbers.

Focusing on value and quality has helped the company beat the market. On the flip side, the online channel sales have fallen by 14.5% as customers return to the stores post-pandemic.

View from the city

According to TipRanks’ analyst rating consensus, Tesco stock has a Strong Buy rating. The stock has ratings from 12 analysts, out of which, nine are Buy and Three are Hold recommendations.

The average Tesco price target is 313.7p with an upside potential of 21.8%. The analyst price targets range from a low of 239p to a high of 350p.

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Looking ahead

Obviously, inflation and rising costs could hurt the retailer’s profitability. As the consumer basket size becomes smaller the company hopes to up its game with further reductions in prices with its supplier partners. It has kept its guidance for profit and cash unchanged.

Along with some economic disruptions, Tesco is well fitted to survive in the harsh weather. The stock outlook is bullish.


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