Tesco Slides to Lowest in Three Months as Analysts Cut Estimates

Tesco Plc (TSCO), the U.K.’s largest retailer, fell to the lowest in more than three months in London trading after worse-than-expected international earnings caused analysts to cut full-year profit estimates.

The shares dropped as much as 3 percent, the third straight day of declines since the Oct. 3 release of first-half results. The fall, the second-biggest in the U.K. benchmark FTSE 100 Index, pushed the stock down to the lowest since July 2 and extended this year’s slide to 24 percent.

Tesco reported its first profit decline in almost two decades this week as worsening consumer sentiment in Europe and restricted opening hours in South Korea compounded a faltering domestic business. Brokerages including Investec Securities and Seymour Pierce today cut their estimates for annual profit.

“Too many of its overseas businesses face trading issues shorter term,” Kate Calvert, an analyst at Seymour Pierce, said in an e-mail, adding that there is a lack of certainty over the success of actions being taken by management in the U.K. She lowered her estimate of annual pretax profit by 8 percent to 3.24 billion pounds and kept a reduce rating on the shares.

Investec analyst Dave McCarthy said he reduced his estimate of trading profit by 6 percent for this year and 8 percent for next. Difficulties in Asia and Europe are increasing, while the U.S. Fresh & Easy chain continues to lose money, he said.

“We remain concerned and believe that Tesco strategy needs a major overhaul,” McCarthy said.

Sunday opening restrictions in South Korea, the grocer’s largest market outside the U.K., will reduce full-year trading profit by about 100 million pounds, Tesco said this week. Consumer weakness in China contributed to a 3.8 percent decline in first-half profit in Asia. Profit in Europe fell 28 percent.

To contact the reporter on this story: Sarah Shannon in London at sshannon4@bloomberg.net

To contact the editor responsible for this story: Celeste Perri at cperri@bloomberg.net

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