Is Tesco Turning?

By Tony Reading
September 7, 2012

LONDON -- It came out of the blue, slashing nearly a quarter off the share price. Tesco's (LSE: TSCO.L  ) profit warning in January -- its first for 20 years -- divided investors between bulls who saw it as a temporary glitch and bears who saw more serious writing on the wall.

It wasn't just among private investors that opinions were sharply divided. Investment guru Warren Buffett rapidly upped his stake to over 5%. But high-yield fund management superstar Neil Woodford took a bearish view, selling out completely in April.

So how is Tesco faring now?

As far as the share price goes, there is little indication of recovery. At 338 pence, they are still 16% below their early-January high of 411 pence. But there is some indication they're slowly clawing their way back. They are up 6.5% from the post-profit-warning low, during which time the FTSE 100 has gone nowhere. Meanwhile, rival J Sainsbury has motored up 14%, and William Morrison has slipped 3%.

Hubris
Tesco's sin was one of hubris -- perhaps not surprising in the light of former CEO Terry Leahy's very long and successful tenure. It took its core U.K. grocery business for granted and neglected it in favor of exciting growth opportunities internationally and in nonfood businesses from out-of-town hypermarkets to banking.

Nemesis came when the U.K. shopper woke up to Tesco's poorer customer service and product offering, and its grocery market share slipped. Meanwhile, the new markets proved tough. Internationally, Tesco lacks the market power it has at home, hypermarkets found online competition tougher than was expected, and some new ventures such as second-hand cars were just a step too far.

Tesco's act of repentance, unveiled by new CEO Philip Clarke in April, was to refocus investment on the core U.K. grocery. Store expansion would be cut back, while more would be spent on refurbishing existing stores, improved staffing, and price promotions.

Trench warfare
Is it working? Competition in the U.K. grocery sector is rather like trench warfare. Tesco's market share is around the 30% level -- roughly double that of each of its big three rivals, Sainsbury, Morrison and Wal-Mart-owned Asda. A big push in sales translates into just a small increase in market share.

Tesco's market share has continued to slip all year, but recent figures hint at a turnaround. Measured over the 12 weeks to Aug. 5, its market share slipped marginally to 30.9%, but in the final four weeks of that period, it rose to 31.4%, according to data from Kantar Worldpanel. In those four weeks, sales grew 5.1%, ahead of Asda at 4.9%, Sainsbury at 2.7%, and Morrison at 1.4%. It's a very small sign, but as the company says, "Every little helps."

Not all are convinced. Asda hit out at Tesco's complex promotions, describing them as "basket bingo." ING's analysts have suggested that Tesco needs to make much deeper price cuts to stop customers switching to Asda. Meanwhile, Tesco's international business has its own headaches, with the U.S. stores still making losses and the business in Korea hit by government regulation.

So Tesco shareholders can expect to wait a while yet before the shares recover their previous levels. But Tesco has the market and financial power to claw its way back, and I remain a patient bull.

A good run
Sainsbury's share price has had a good run over the summer, matching its sales success over the period. Up 12% since June 1, they look a little expensive at 324 pence, but with tangible net assets of about 290 pence and a yield of 5%, they remain a good defensive investment.

Morrison makes a virtue of its slowness to act. It is only now rolling out a plan for a chain of convenience stores, long after Tesco and Sainsbury. Having eschewed hypermarkets, its chief executive has recently dismissed them as "a blip on the pages of retail history." And its adventures into nonfood retailing have been specifically confined to its acquisition of baby-goods retailer Kiddiecare.

Just why has Warren Buffett singled out Tesco as a rare foreign investment? You can delve into this question in this report from the Motley Fool: "The One U.K. Share That Warren Buffett Loves." It's free, and you can download it here.

Where is the U.K.'s leading dividend stock-picker investing today? The identities of Neil Woodford's favorite blue chips are revealed in this free Motley Fool report -- "8 Shares Held By Britain's Super Investor."

More investment opportunities:

• New Brooms To Sweep Clean At Astra and Barclays
• How To Unearth Great Oil And Gas Shares
• 10 Steps To Making A Million In The Market

http://www.fool.com/investing/international/2012/09/07/is-tesco-turning.aspx

Median Household Income in the United States

First off - what is median household income?

According to the U.S. Census Bureau, "household median income" is defined as "the amount which divides the income distribution into two equal groups, half having income above that amount, and half having income below that amount."

The U.S. Census Bureau currently publishes median household income data from 1975 until present day.

Year

No. of Households

Nominal $

Inflation Adjusted $

2010

118,682,000

$47,022

$49,445

2009

117,538,000

$47,361

$50,599

2008

117,181,000

$47,832

$50,939

2007

116,783,000

$47,752

$52,823

2006

116,011,000

$45,817

$52,124

2005

114,384,000

$44,082

$51,739

2004

113,343,000

$42,167

$51,174

2003

112,000,000

$41,185

$51,353

2002

111,278,000

$40,347

$51,398

2001

109,297,000

$40,148

$52,005

2000

108,209,000

$39,926

$53,164

1999

106,434,000

$38,714

$53,252

1998

103,874,000

$36,932

$51,944

1997

102,528,000

$35,086

$50,123

1996

101,018,000

$33,593

$49,112

1995

99,627,000

$32,191

$48,408

1994

98,990,000

$30,321

$46,937

1993

97,107,000

$29,244

$46,419

1992

96,426,000

$28,547

$46,646

1991

95,669,000

$27,937

$47,032

1990

94,312,000

$27,601

$48,423

1989

93,347,000

$26,550

$49,076

1988

92,830,000

$24,879

$48,216

1987

91,124,000

$23,685

$47,848

1986

89,479,000

$22,588

$47,256

1985

88,458,000

$21,405

$45,640

1984

86,789,000

$20,295

$44,802

1983

85,407,000

$18,859

$43,453

1982

83,918,000

$18,422

$43,758

1981

83,527,000

$17,375

$43,876

1980

82,368,000

$16,017

$44,616

1979

80,776,000

$14,605

$46,074

1978

77,330,000

$13,121

$46,202

1977

76,030,000

$11,743

$44,481

1976

74,142,000

$10,962

$44,201

1975

72,867,000

$10,218

$43,479

1974

71,163,000

$9,600

$44,649

1973

69,859,000

$8,945

$46,109

1972

68,251,000

$8,226

$45,196

1971

66,676,000

$7,671

$43,340

1970

64,778,000

$7,396

$43,766

1969

63,401,000

$7,057

$44,108

1968

62,214,000

$6,464

$42,527

1967

60,813,000

$5,952

$40,770

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Source: U.S. Census Bureau (*.pdf)


http://www.davemanuel.com/median-household-income.php

Inflation Calculator
http://www.davemanuel.com/inflation-calculator.php

Now at Tesco: Drive-Through Grocery Pickup

By Sarah Shannon - Sep 4, 2012

Jason Alden/Bloomberg

A page from the Tesco website is displayed for a photograph on an iPad.

When Nikki Dye tired of supermarket queues, she tried having her groceries delivered, but that meant committing to being at home for a two-hour delivery window. Now, she’s switched to a service where she can order online and then collect her groceries from a local store.

Enlarge image

By yearend, Tesco expects to complete collection points in 150 stores as part of a 1 billion-pound ($1.6 billion) initiative to revive domestic sales. Photographer: Simon Dawson/Bloomberg

“It’s so quick,” the 25-year-old working mother said as Tesco Plc (TSCO) staff at the store in the southern English town of Harlow loaded her car trunk with goods costing 80 pounds ($127).

With same-store sales falling, Tesco is betting it can get a lift from shoppers like Dye by tripling the number of outlets offering what it calls click and collect. The chain’s leading share of the U.K. grocery market shrunk to a seven-year low this year as more Britons chose upscale competitors such as Waitrose Ltd. or discounters like Iceland Foods Ltd. and Aldi.

By yearend, Tesco expects to complete collection points in 150 stores as part of a 1 billion-pound ($1.6 billion) initiative to revive domestic sales. The grocer is also hiring 20,000 staff, updating its house brand products, refreshing stores and adding more personalized promotions.

Bryan Roberts, an analyst at Kantar Retail in London, said click and collect will give shoppers a reason to choose Tesco over its competitors. Among the top four grocers in the U.K., onlyWal-Mart Stores Inc.’s Asda, (WMT) the No. 2 chain, has a similar service for groceries, and it’s just in a trial stage. The service also helps Tesco stand out from online retailers.

‘Ahead of the Pack’

“It’s going to be a key growth opportunity,” Roberts said. “The economics are much superior to home delivery,” which requires grocers to operate a fleet of vans and drivers.

Tesco, based in Cheshunt, England, expects that making shopping easier will convince customers to come back more often. Deloitte LLP estimates that people who shop via different methods -- the Internet, smart phones and visits to the supermarket -- spend more than double those who only shop at physical stores.

Click and collect “is gaining traction, and Tesco is ahead of the pack,” said Clive Black, an analyst at Shore Capital who recommends holding the stock. “While it’s a very modest part of supermarket activity it is one that’s expected to grow.”

Web sales, which accounted for 3.4 percent of U.K. grocery spending last year, are set to almost double over the next five years, according to the Institute of Grocery Distribution.

Declining Sales

Tesco’s domestic sales have declined for the last four quarters, with U.K. same-store revenue falling 1.5 percent in the 13 weeks ended May 26. That has left Chief Executive Officer Philip Clarke to seek new avenues for growth. Expanding click & collect, which started from a store in southern England two years ago, forms a part of his plan.

The service relies on its simplicity and convenience, said Ken Towle, Tesco’s director of Internet retailing. For a 2-pound fee, a shopper’s groceries are picked, packed and stored at the drive-through point. When the customer arrives, a staffer loads the groceries into the trunk.

“What customers like is they are in control,” Towle said. “They choose when they want it to be available. It de-stresses the whole experience for them.”

The expansion has come at a cost. Tesco has had to train staff in customer service and product returns, Towle said. And adding the collection points to stores has cut the floorspace available to sell products.

A big challenge is linking up online orders with picking and packing the groceries in the chosen time-slot from the store, according to Chris Gates, director of retail at Hitachi Consulting, a technology adviser that has worked with Tesco. Another issue is ensuring stores can handle returns and have enough supplies to account for both online and physical buyers.

Asda Trial

“Whilst companies realize it’s the way customers want to shop, it takes a lot of investment to make it happen,” Gates said. Retailers, he said, typically see a return on their investment in two years.

Asda says it has had trouble getting planning permission to set-up drive-through collection points. The company started testing a 1.50-pound-per-order click & collect for groceries this year and has about 10 outlets. Stores with the service get about 60 to 100 orders a week almost immediately, said Jon Wragg, director of Asda’s multi-channel strategy.

The retailer has trialed low-cost alternatives like a simple shelter in a carpark with a van that customers collect from, to a formal drive-through attached to the store.

French Insight?

“It’s all the understanding and refining of the experience for customers that I think is going to be tough,” Wragg said.

France may offer some insight into the concept’s potential. While British grocers have focused on home delivery of online orders, French companies have embraced drive-throughs instead.

Groupe Auchan SA has had drive-in collection since 2000, and Le Clerc, Casino Guichard-Perrachon SA (CO) and Carrefour SA (CA) also now offer the service. Planet Retail estimates there were about 1,000 drive-through points in France in May. Le Clerc expects about 5 percent of its sales to come from the drive-through format by 2015, up from 1.4 percent in 2011.

Planet Retail analyst Malcolm Pinkerton estimates that Tesco will generate about 6.4 percent of its overall U.K. sales from online orders this year, which will surge to 9.3 percent, or 5.9 billion pounds, by 2017 as click & collect is extended.

“Anybody that’s in retail who is not multi-channel would want to think quickly about having a strategy,” said Colin Jeffrey, director of retail research at Deloitte Digital. Click and collect is “a must, but it’s a massive challenge.”

http://www.bloomberg.com/news/2012-09-03/now-at-tesco-drive-through-grocery-pickup.html?cmpid=yhoo

How to buy a house at UK auction

How NOT to bid at auction

How to buy a house at UK auction

UK house prices ruining UK economy

At 5 min, "invest in other assets."

UK Economy Crash Course (whole presentation)

Also visit: 

Why UK will have economic depression

http://www.youtube.com/watch?v=0PQZuB1TeP4&feature=endscreen

How to Buy Properties and Sell Quickly

How to buy income properties?

propert

Warren Buffett - How to Become the Person You Want

MCA: The government of the day must listen to the rakyat and act in accordance with national interest

MCA is the government.

Tee Keat: The reality of bi-partisan politics. Young people looking for participatory democracy.

What are the issues raised by the PAS in their ceramah?

http://www.youtube.com/watch?v=iqgbbZhILeg&list=UUFznwgrJ0SorgTbQlpOKOaQ&index=13&feature=plcp

Auditors declare Talam deal ‘sound commercial decision’

September 05, 2012

Selangor had appointed the auditors following claims of impropriety from MCA. — File pic

KUALA LUMPUR, Sept 5 — Independent auditors have cleared the Selangor government of any irregularities in its debt recovery exercise involving the company formerly known as Talam Corporation and declared it a “sound commercial decision,” Mentri Besar Tan Sri Khalid Ibrahim said today.

Khalid’s administration had appointed KPMG Transaction and Restructuring Sdn Bhd (KPMG) in July to review its RM392 million debt recovery exercise following allegations by MCA that the state government’s dealings with Talam — now known as Trinity Corporation — was lopsided and had ended up costing taxpayers up to RM1 billion.

Khalid said the debt settlement was in the form of assets comprising nine plots of land, two properties, a 60 per cent stake in a subsidiary of Talam and cash/debt assignment.

“From the review exercise, KPMG is of the view that the Selangor state government made a sound commercial decision under the circumstances at that point in time in relation to the settlement arrangement.

“The settlement process is still ongoing and based on currently available information, the gross consideration is sufficient for Menteri Besar Selangor Incorporated (MBI), being the party tasked with recovering the debts on behalf of the Selangor state government and its subsidiaries, to recover the Talam debts, with no debt waiver by MBI.”

In July, Khalid had said the Selangor government would appoint independent auditors to review its debt restructuring agreement with Talam Corporation and clear the air over claims of funds abuse by MCA.

Khalid insisted his administration had not relieved Talam Corp of its debts as claimed, but instead had recovered monies that the troubled property developer owed the state’s subsidiaries.

MCA Young Professionals Bureau chairman Datuk Chua Tee Yong had recently alleged that Khalid’s administration bought over Talam Corp’s RM676 million assets to clear the firm’s outstanding debts of RM392 million to three state subsidiaries.

He further claimed that the RM392 million in the supplementary budget approved by the state assembly in November 2010 to the MBI was used by the state government for the alleged bailout.

Trinity Corporation had also denied allegations that it sold land to the Selangor state government at above market value, pointing out that the valuation fell under the scrutiny of the Securities Commission’s Assets Valuation Department.

The company added in a stock exchange filing in July that the valuation was also approved by SC and Bursa Malaysia.

Speaking today, Khalid said the auditor’s conclusion demonstrated that the debt recovery was legal, ethical, done in good faith and had in no way compromised the interests of the state, its subsidiaries or the people of Selangor.

Khalid added that the state had appointed four spokesmen to speak about the matter. The four are MPs Dr Dzulkifli Ahmad from Kuala Selangor, Tony Pua from Petaling Jaya Utara, William Leong from Selayang and political secretary to the mentri besar, Faekah Husin.

“These four are authorised to discuss and debate the issue with any individuals or organisations they deem fit. We are confident that with their expert command of the facts at hand, they will able to facilitate healthy and informative discourse,” said Khalid.

http://www.themalaysianinsider.com/malaysia/article/auditors-declare-talam-deal-sound-commercial-decision/

Related:
http://myinvestingnotes.blogspot.com/2012/07/talam-for-dummies.html

Stocks and Bonds: Risk vs. Return

Take a good look at this chart.

It is a portfolio consisting of only 2 assets:  stock and bond.  

Here are some interesting points:  

1.  100% in Stock
This portfolio has the highest risk and also probability of the highest return.

2.  100% in Bond
This portfolio has low risk (NOTE: NOT THE LOWEST) and has lower return.

3.  50% in Stock and 50% in Bond
This portfolio has the same risk as and has higher return than the portfolio that is 100% in Bond.

4.  25% in Stock and 75% in Bond
This portfolio has the lowest risk and has higher return than the portfolio that is 100% in Bond.


(You may assume that holding cash giving an interest rate of 3% is the equivalent of holding a bond with a coupon rate of 3%.)


Conclusion:

Holding 100% in bond carries the same risk as holding 50% in stock and 50% in bond.  However, the probability of a higher return for the same risk should make investors favour holding 50% in stock and 50% in bondthan to hold 100% in bond.

For those who are very risk averse, for example in the present falling market, the lowest risk is the portfolio that is 25% stock and 75% bond, and not the portfolio that is 100% in bond.  Moreover, the portfolio that is 25% stock and 75% bond, offers a probability of higher return for lower risk, that the portfolio with 100% in bond.

London luxury home market risks price crash

Tuesday, 04 September 2012

(Reuters) - Developers rushing to build top-quality London homes to cash in on strong overseas demand are in danger of being stung by a price crash as they flood the market, property consultancy EC Harris said.

Over 15,000 homes in developments worth more than £38 billion (RM187.81 billion) are due for completion in London's most expensive neighbourhoods in the next 10 years, a 70% jump on last year, an EC Harris report said Monday.

The total floor area covers almost 20 million sq ft — equivalent to the size of the London Olympic park — and includes properties in upmarket Mayfair, the City of London financial district and the south bank of the river Thames.

"Developers are racing to get first to site because they don't want to miss out on the boom that's happening," said Mark Farmer, head of residential at EC Harris. "There is a danger that if all these schemes happen that you'll have a massive oversupply."

Prices for luxury homes have surged in recent years after economic turmoil in Europe and political uprisings across North Africa drove investors to the relative safety of central London property.

Signs of a slowdown appeared after the UK government said in March it would clamp down on tax avoidance by overseas buyers of homes costing more than £2 million.

Prices for the best central London homes rose 1.8% in the three months to August, the weakest quarterly growth since November 2010, property consultant Knight Frank said Monday.

About 4,000 high-end homes are scheduled to be built in 2016 alone, an eight-fold increase on the average number built in London each year. The risk of over-building may be tempered by a tight supply in development finance, Farmer said.

Recent entrants to the market include offices and shops developer British Land, which said in July it would redevelop a block in Mayfair into luxury flats, and Malaysian developers SP Setia and Sime Darby, which plan to build over 3,000 homes at Battersea Power Station.

Such developers have been described as "late to the party" by some residential players.

A May report from Development Securities warned that London luxury home prices could halve if the eurozone broke up.

Other risks include further devaluation of the euro, which would make London property look more expensive, and changes to the UK planning system that make it easier to convert offices to homes and add to the pipeline, EC Harris said.

"The reality is that no one knows what the conditions will be in five or 10 years," he said.

http://www.malaysia-today.net/mtcolumns/newscommentaries/51409-london-luxury-home-market-risks-price-crash

China Stocks a Screaming Buy: Strategist

Published: Tuesday, 4 Sep 2012 | 3:32 AM ET

By: Lisa Oake
Co-Host of CNBC Asia's Squawk Box

The old adage in the stock market is never try to catch a falling knife.  With the Shanghai Composite Index at levels not seen since the aftermath of the financial crisis, many investors are steering well clear of Chinese stocks.

Liu Jin | AFP | Getty Images

But Stephen Sheung, Investment Strategist at SHK Private, thinks this is the perfect time to buy Chinese equities [.SSEC  2043.65    -15.50 (-0.75%)   ]. “We still see a rebound in the Chinese economy over the course of the year and equities warrant a higher valuation than now,” Sheung told CNBC Asia’s “Squawk Box.”           

He added that China’s cautious approach to stimulate the economy will result in a gentle re-acceleration of economic growth, but investors should not make the mistake of comparing Beijing’s recent efforts to stimulate the economy with the massive $586 billion stimulus program of 2008.

Policy Lag

“This time around, the policies are not coming directly from Beijing, but more so at the provincial level. The Chinese government is trying to get more private capital to be more involved in the investment projects so the policy lag might be longer,” said Sheung.

Beijing — wary of stoking inflation and reigniting property speculation — is using a lighter hand with stimulus this time around. Despite mounting evidence the economy is grinding lower, the central bank has been quiet since last cutting interest rates in July.

RELATED LINKS

• Why China Will Not Bow to Pressure to Boost Economy
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“Chinese GDP in the next few quarters will be at a more stable and calm level in terms of pick up. You might have to wait until November to December to actually see things turn around, but when that comes, you'll see a cyclical pick up in (corporate) earnings and the GDP,” said Sheung.

Until then, he is advising investors to take advantage of China’s economic downtime and get stocks on the cheap.

“Valuations are the solid foundation for Chinese equities. What investors have to do right now is really look ahead,” he said.

Follow Lisa Oake on Twitter: @LisaCNBC

© 2012 CNBC.com

http://www.cnbc.com/id/48890913