Tesco Sells Out of Poland, Attention Shifts To Next Week's Update

Yesterday Tesco announced that it was selling its Polish business to Danish retail group Sailing for £181 million as the supermarket scales back its international presence.

Stocks (1)

Yesterday Tesco announced that it was selling its Polish business to Danish retail group Sailing for £181 million. The agreed deal will include the sale of 301 Polish stores. Tesco said that the move will now allow it to focus on its central European business in in Czech, Hungary and Slovakia where it has a larger market presence. where it has a larger market presence.
Tesco Polska made sales of £1.4 billion last year and an operating loss of £24 million. This deal will earn Tesco £165 million.

The sake of Tesco Polska is part of a wider move that it is seeing Tesco scale back its international operations. Earlier this year the supermarket retreated from Thailand and Malaysia in a deal worth £8 billion.

Prior to coronavirus, Tesco had been facing increased competition in the UK as shopper had turned towards budget chains such as Lidl and Aldi. However, the covid-19 lockdown has seen habits change. Spending on essential items increased however, shoppers are cutting back on non-essentials. With job losses expected to start piling up in the coming months, consumers will almost certainly rein in their spending further.

With this in mind we view the move as positive. The removal of a profit diluting part of the business is a big plus and will make the supermarket’s foundations that much stronger. Furthermore, the additional cash that the deal brings will plump up Tesco’s balance sheet. A prudent move in these uncertain times., particularly if the economic recovery from covid-19 is more drawn out that initially expected.

For further information on where Tesco stands traders will now look ahead to a trading update by the supermarket giant next Friday 26th June. This should provide fresh impetus and could bring Tesco out of the holding channel that it has been trading in for the past 4 weeks.

Chart thoughts
The news initially lifted the share price of Tesco in the previous session, pushing it to a high of 230p before the stock eased back into the close, ending the session at 226p. 
The stocks trades below its 50, 100 and 200 sma on the four-hour chart, a bearish chart. However, Tesco also traded in the horizontal channel that it has been trading in since mid-May, between resistance at 235p and support at 221p



More from Equities

Join our live webinars for the latest analysis and trading ideas. Register now

GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.