Tesco shares downgraded to ‘junk’, opportunities for housing?

on Apr 22 in Uncategorized by

In 2011-12 Tesco recorded a record profit of £3.8 bn, but for 2014-15 it has recorded a record loss of £6.4 bn. The decline in the value of its property portfolio comes as a direct result of falling footfall in many of its out of town superstores.

Tesco’s credit rating had already been downgraded to ‘junk’ status by Moody.

Tesco is a part of Britain’s geography, with a store in every postcode area, but now the store’s new chief executive, Dave Lewis, has announced that 43 unprofitable stores will be closed and plans for 49 new stores will be been ditched. Even the head office will be sold, all to help reduce overheads by 30%.

The situation was not helped when last September Tesco over-egged its half year profits by £263 million.

Including the cost of closing down its 199 stores in the USA (which never made a profit), plus its UK property write down, Tesco’s post tax profits have dropped very dramatically.

Last year Tesco’s previous chief executive Philip Clarke said, “Tesco needs to put the love back into stores,” but could it be that Tesco needs to put some of its love back into the built environment and the communities around its stores too?

With almost a hundred sites in highly accessible locations now becoming redundant, could Tesco diversify and help to meet the country’s housing need?

Retailing and housebuilding are not incompatible activities. Supermarkets need to be attractive destinations and mixed-use housing schemes can help with this.

A more attractive context for a Tesco store might include a public square at the store entrance, fronted by the store café and ‘click and collect’ collection point, and residential entrances for living over the shop.

Tesco have built homes over their stores and public squares in front of them before, as here in Earl’s Court.

Tesco has over £12 billion worth of bonds in euros and sterling and they have a bank that can fund new mortgages for their customers. They have nearly 100 redundant sites plus air space above 3,000 stores that could be used for building homes.

Investors are still pondering what does Tesco actually stand for?

Now that they have withdrawn from the USA and Japan, might this be the time for them to put some love back into Britain?

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