Only the second part of the assignment needs to be done which is the final individual share portfolio review. The company is Tesco.

IntroductionThis report entrust conclude on the performance of Tesco Plc. over the previous 5-months. Performance will be based on the shargon- charge performance, company reports as well as a comparison between J Sainsbury Plc, Morrison Plc and U.S rival Wal-mart. study Headwinds RemainPrice Competition addicted the current environment, aggressive competition in the UK grocery market is the greatest headwind to continued growth. According to Kantar Worldpanel (2014) Tesco continues to tolerate market-sh be as aggressive competition from discount brands Aldi and Lidl pushes greater emphasis on Tescos marketing and price strategy to retain custom as both competitors plans major elaboration plans in the coming years. To add, major price competition from the likes of ASDA and now Morrisons is gaining momentum once once more, (BBC Business, 2014) Online. Morrisons aggressive plan to unload GBP1bn on overturnting prices over tether years will put pressure on Tesco and opposite supe rmarket operators to respond in assure to protect market share. This could accelerate margin erosion across the sphere of influence in 2014Morrisons price cuts are likely to be funded by planned cost nest egg and potentially by accepting a lower margin, (Fitch Rating, 2014). They are more aggressive than the GBP1bn initiative Asda announce in November, which at the time was to be spread over five years. To limit the doctor on margins, retailers will probably respond by accelerating cost cutting initiatives and investment in product ranges and stemma formats. Tesco has the strongest margin, but this has been shrinking for several years, (Financial Times, 2014) Online. It may now be pushed to rethink its pricing in order to defend market share, which has come under pressure as evidenced by weak 2013 Christmas trading. Furthermore, the higher up could dampen CAPEX plans for the coming years.Rise of DiscountersAs mentioned, the recent Kantar Worlpanel (2014) report cemented the r ise of Aldi and Lidl however recent reports from Tesco have attempted to derogate the holy terror, with little success. The CEO referred to them as niche players, (Tesco, 2013). However, these players control 45% of the affluent German market and are market leaders in several other large countries. We would not compare the effectiveness and the threat posed by Aldi in 2014 with that posed by Kwik Safe (disappeared) in the 1990s. It is not an informative map in our view. CAPEX remains strongCAPEX guidance was cut to a maximum of ?2.5bn per annum, in line with market expectations. Tesco plans to cut new seat additions in the UK to 700,000 sq ft in 2014/15 from 1.4mn in 2013/14. CAPEX is shifting from new space to maintenance. Having invested ?400mn in the UK Refresh programme in 2013/14, the company plans to invest ?500mn per annum in each of the next three years. This is close to ?2bn in total to complete the programme. The priority for next year is re-modelling the Extra format where the gross gross revenue performance is the weakest, (Tesco, 2013).Online growth MixedA lot of focus, as expected, has been put on the increasing movement online. With Morrisons considering and online platform, time Waitrose moves in with more products and free economy.Tesco announced it will reduce the fee it charges for home delivery and track & collect. While it is good that the company aims to be competitive, excessive cuts in the delivery charge would reduce margins and likewise incentivise the customer to order smaller quantities more frequently, making the economics a lot less attractive.The delivery charge is a tool used to distribute demand among the different time slots and days of the week. Tesco expose ?127Million of trading profit from online grocery (?2.5bn sales), (Tesco, 2013), suggesting a 5% margin. According to the company, all direct costs are fully charged, that is the cost of the pickers and the delivery, (Tesco, 2013). This would not include things such as store depreciation, store energy costs, rate etc. Given this, on estimated 25Million annual orders of ?100 each, the delivery fee (?4-5 per order) would account for the great majority of profit. If this delivery fee is substantially cut, so will the profit obtained. piece of land PerformanceGraph mete out Price Performance of Selected Companies 6-Month. Data obtained from Bloomberg (2014) Online.Focusing on share performance (Graph 1), over the previous 6-months, Tesco Plc is down(a) by 18.3%, however performance is still between than W.M. Morrison and J Sainsbury, whose shares have fell by 24.2% and 19.9% respectively. Given this the grocery sector has been a weak performer on the market, apt(p) that the FTSE 100 has risen by 2% over the same period. Weakness in the sector was seen on the 12th litigate (circled), afterwards the market release from Kantar Worldpanel (2014).According to Kantar Worldpanel (2014), Tescos market share dropped to 28.7% in the 12 weeks end ed March 2. That compares to 29.6% a year ago and is the lowest level since late 2004. Adding to the companys woes, Tescos sales were down 0.6 percent in the three-month period. The main issue for investors was the movement of these sales to discounters Aldi and Lidl, plus upmarket grocer Waitrose.Morrisons also loosened further to a share of 11.1% from 11.8% a year earlier, while ASDA, a hyponym of Wal-Mart Stores eased to 17.5%, a 0.3 point fall Y-O-Y. Sainsburys was the only grocer among Britains big four to post on to its market share in the period, reaming at 17%, (Kantar Worldpanel, 2014). The report noted that the big-four where competing more for a shrinking middle-ground as consumers move to either discounters or upmarket retailers over the past 3-years, Waitrose, Aldi and Lidl have interpreted a combined 3.5 points from competition, equating to ?4.4Billion in sales per year, (Kantar Worldpanel, 2014).Taking an international look, while Wal-Mart did record a small drop o n the 12th March, over the 6-month period its shares are up 3%, wedded its exposure to the U.S economy, which has been performing strongly, supported by consumer spending. heavysetWhile the recovery in the UK economy will present opportunities for Tesco Plc, given its exposure to consumer spending through an extensive product offering, major headwinds remain as the continued expansion of discounters pose a real threat, contrary to the thoughts of Tesco management. Furthermore the price-wars between major retailers commence once again for the shrinking middle-ground of the market, margins are expected to be hit. This has the potential to derail Tescos expansion plans, which will impact on future performance given aggressive competition.ReferencesBBC Business (2014) Online Morrisons restructuring sparks fears of new price war, UK, BBC News.Bloomberg (2014) Online Share Price Data, Available at http//www.bloomberg.com/markets/, Accessed 27/03/2014.Financial Times (2014) Online Tesco P lc, Available at http//markets.ft.com/research/Markets/Tearsheets/Summary?s=TSCOLSE, Accessed 27/03/2014.Fitch Rating (2014) Morrisons price cuts to pressure Tesco margins at risk, UK, Fitch Ratings Agency.Kantar Worldpanel (2014) peculiar change in grocery retailing, UK, Kantar Worldpanel.Tesco (2013) Annual Review 2013, UK, Tesco Plc.