Tesco’s
Posted in Events dear boy. Events at 13:00 on 17 January 2012
I’m sure you’ll all have heard that Tesco’s shares recently fell in value after a profits warning.
Yet Tesco’s seems still to be on course to make £3.5bn of pre-tax profit. (See para 2 in the link.)
What?
A company is going to make £3.5bn profit and the its share price falls?
Isn’t this a prime example of how our values as a society have gone seriously askew?
£3.5bn a year is approximately £10 million a day.* And the people who buy and sell shares think that’s too little?
Do they think profits can keep going up for ever and ever?
Get real. If that were the case then eventually everything on the planet would be Tesco’s, and nothing but Tesco’s. It’s simply not sustainable.
And how can any enterprise possibly make £10 million a day? It’s obscene.
That level of profit means either – or both – of two things.
1. Tesco’s is paying its suppliers and/or employees too little.
Or 2. It is charging its customers too much.
(I bet they don’t pay all that much in tax either.)
*Edited from original – see comments.
Tags: Tesco's
Ian Sales
17 January 2012 at 17:52
I think your maths is a bit off. $3.5 billion a year is just under £10 million profit a day. Unless you were extrapolating to £1 billion revenue a day…
jackdeighton
17 January 2012 at 19:41
Yeah you’re right. For some reason I used 35 billion in my calculation rather than 3.5. (I’ve got it written down as 35 billion.)
£10 million is still a whacking amount though.
Martin McCallion
17 January 2012 at 23:28
Furthermore, it’s not as if they made a loss; they didn’t even make less of a profit. if I read it right, what happened is that profit growth slowed. Yes, the rate of increase of profits went down, so that share price fell. Proof if it were needed of the madness of the share market.
Paul Fraser
18 January 2012 at 10:23
I think you need to look at how much money is invested in the company: if that million a day is equivalent to a return of half a per cent a year, you might as well liquidate the company and put the money in the bank. I can never understand these “x billion profits!!” outrages because this fundamental fact is ignored.
On the other hand, there was a interesting article in Forbes about managing shareholder/market expectation:
The Dumbest Idea In The World: Maximizing Shareholder Value – Forbes
http://www.forbes.com/sites/stevedenning/2011/11/28/maximizing-shareholder-value-the-dumbest-idea-in-the-world/
jackdeighton
18 January 2012 at 20:22
“if that million a day is equivalent to a return of half a per cent a year”
I very much doubt that it is as low as that. If it were, then last year’s (smaller) profits – see Martin McCallion’s comment – would have led to a share price drop then.
I still think, though, that any company making £10 million profit a day is ripping off its suppliers/employees/customers big time.
The unrealistic expectations of ever continuing growth in profits is crazy.