Nigel Stevenson, CFA
Research analyst, value, special situations

Tesco: Aggressive Accounting Hides Financial Weakness

Shares in Tesco (OTCPK:OTCPK:TSCDF, ADRs OTCPK:OTCPK:TSCDY), the UK supermarket operator, have fallen by a third over the last year; having declined a further 7% on 29 August, following another profit warning and a large cut in its dividend. The shares are now at their lowest level for over a decade, and less than half their peak reached before the financial crisis in 2007.

The company continues to lose market share in the UK, which still accounts for the majority of its profits, while its overseas operations have also struggled. Investor opinion on the company is strongly divided. Supporters argue that Tesco remains a formidable competitor that, despite recent declines, still has a market share of 29%,...

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