Holidays Come Early

10122019 - tesco

Image source: Tesco, In Time @uaintime - Giphy

What's going on?

Tesco, the UK’s largest supermarket chain, unwrapped an early Christmas present for investors on Monday – and its shares rose a merry 5%.

What does this mean?

The grocer said it’s thinking about selling its businesses in Thailand and Malaysia, which contributed 13% of its total profit last year. Every little helps: analysts reckon the sale could fetch Tesco around $9 billion. Although Tesco losing its fastest-growing operations might be tough, the company plans to add more festivity to its British business by using some of the cash it raises to improve its prospects in the face of intense competition back home.

Low-cost German rival grocery chains Aldi and Lidl, as well as consumers’ shift to ecommerce, are among the reasons Tesco cited for thousands of job cuts in the UK this year. The hope, then, is that fresh cash will help Tesco restructure its business by opening new shop formats – like checkout-free stores and the company’s own discount chain (to better rival Aldi and Lidl) – and closing unprofitable older ones.

Why should I care?

For you personally: Payday.

Tesco’s stock rose on Monday. Investors may have been buying in anticipation of higher future profits – and in the hope of a one-off dividend paid out from the cash received from its Asian business sale. Given that Tesco represents over 1% of the UK stock market, that payment could be a hefty windfall for the British pension funds invested in Tesco – and for thousands of other investors who own the company’s stock through European and global exchange-traded funds.

Zooming out: Not all food comes off shelves.

Investment group Prosus upped its offer for British online food delivery company Just Eat on Monday. The group’s “hostile takeover” attempt aims to break up the already agreed merger between Just Eat and Dutch rival by offering a higher price and paying in cold hard cash rather than stock as proposed.

Originally posted as part of the Finimize daily email.

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