Tesco is set to turn in a kingsize annual profit of £3bn a year by 2009, according to a leading City stockbroker.
The retailer itself sought to play down future projections when it became the first British retailer to smash through the £2bn profit mark at its full-year results last month.
But Shore Capital, which this week reiterated its rating of Tesco as a recommended long-term investment, has predicted great things for the retailer going forward.
In a new 21-page report, the stockbroker - which was only out by £4m when it predicted that Tesco’s balance sheet for 2004/2005 would show a group profit of £2.025bn
(it actually posted a profit of £2.029bn) - said that it expected annual profits to climb to £2.251bn this year and then show similar double-digit annual increases before rocketing to £3.023bn by 2009.
It even claimed that its expectations for Tesco were “reasonably cautious”, fuelling speculation that future results could be even more spectacular than already anticipated.
The report added: “Tesco stands apart from the vast majority of large quoted retailers, to our minds, in that it has clear transparent growth potential.”
Comparing the retailer with other listed UK and international retailers and manufacturers, Shore continued: “Indeed, while we cannot be dogmatic in this ever-changing world, we feel much more confident about the capability for medium-term double-digit growth from Tesco than from most, if not all, of the other groups.”
Shore said it now expected growth in the UK to focus on non-food and that half the anticipated 1.8m sq ft addition of selling space this year would be devoted to that category.
It also warned Tesco’s detractors not to expect any sanction from the competition authorities, despite the retailer’s seemingly unstoppable advance.
Noting Tesco’s apparent signal to steer clear of buying rival c-store chains while it concentrates on organic growth of its Express estate (The Grocer, April 16, p4), Shore added: “We cannot rule out that the regulator (the OFT) could refer Tesco for investigation at some stage, but the grounds for doing so from a purely consumer perspective are not clear - Tesco is among the cheapest retailers in the UK.”
Simon Mowbray