Tesco reports full-year losses hit £6.38bn: What the analysts say

“We believe Tesco should consider closing 200 underperforming supermarkets/superstores and focus on growing the more profitable remaining 700 stores (excluding Express), in addition, this should also allow for £40m of cost savings from the closure of a distribution centre.

“Tesco should not only reduce its slowest selling product range, but also reduce credit days to secure a much lower net cost of goods to invest and recapture its customer base and squeeze Sainsbury’s who we believe have been the main net beneficiary of Tesco’s poor trading.

Matt Davies, Tesco’s UK boss as of June 1, should consider a further reduction in staff and a significant simplification of central functions and category management.” – Mike Dennis, Cantor Retail        

“Dave Lewis has made the right initial steps on the long journey to potentially stabilising the company and we believe Tesco has a fighting chance of regaining some of its former glories: a fantastic operator chasing cash returns to investors rather than global domination.” – Bruno Monteyne, Bernstein Research

“Although pricing strategies may have helped drive customers back through the doors, all eyes remain on Mr Lewis to see if he can build on this first set of dismal results since taking the helm and turn around Tesco’s fortunes.

“He certainly has a long way to go to reassure investors with Tesco’s share price today a long way off its pre-crisis peak of 487p in 2007.” – Julie Palmer, Begbies Traynor

 “Those who believe that ‘one swallow does not make a summer’ will have found little to cheer them within Tesco’s preliminary announcement. At £6.4bn, the statutory pre-tax loss was even worse than feared. Equally concerning was an underlying profit margin of only 1.4%.” – David Stoddart, Edison Investment Research

“We see this update as a stepping stone and not a definitive event that outlines the direction of travel, composition, nature and extent of Tesco in the future.

As such Tesco is demonstrably over-leveraged, as outlined by management with a combined £21.7bn of net debt, operating lease commitments and pension deficit and it needs to deleverage, materially so.

“However, how it does so and at what pace is not yet set out by the company; be that a mix & match of disposals or equity fund raise. As such Tesco is setting its own agenda and we sense it will update the market when it is ready, noting that there are no immediate liquidity constraints. We do expect disposals and/or a capital raise.” – Darren Shirley, Shore Capital

 “The simple fact is the value of out-of-town sites has fallen as openings have been mothballed. Although it’s been a disastrous year, Tesco is in effect cleaning out the closet – enabling management to start with a clean slate in 2015/16 on which to rebuild the business.” – David Gray, Planet Retail