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Tesco cuts earnings guidance
The supermarket chain also trimmed its earnings guidance for the full-year, saying that profits will now come in at the lower end of the previous range given. Tesco now expects full-year retail adjusted operating profit of between £2.4 billion and £2.5 billion. However, it upgraded full-year retail free cash flow expectations to at least £1.8 billion. Net debt also fell by £500,000.
Management raised the interim dividend by 20.3% to 3.85p and said that so far it had returned £450 million to investors via its share buyback programme and plans to return a further £300 million by April 2023.
“Tesco has to try to offer attractive prices to stave off the threat from Aldi and Lidl and while it can rely on its purchasing power to some extent, it is still having to sacrifice margins to meet this challenge,” said AJ Bell investment director Russ Mould. “The uncertainty is palpable in the company’s outlook and inevitably this will make the market rather nervous.”
However, analysts at broker Barclays reiterated their buy recommendation on the shares this week and have a price target of 325p.
The shares are down 25% this year to 199.6p and are trading at six-year lows. Nevertheless, the company looks better placed than many in its sector to weather the cost of living crisis storm, making the shares a long-term buy.
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