My grandfather was no financial whizzkid. A family man with little interest in worldly goods, he bought one share in his entire life – Tesco.
My mother inherited his holding in the early 1990s and still holds the stock to this day.
Back then, Tesco shares were below 70p. Today, they are £3.09 so Mum has done well and received plenty of dividends to boot.
In charge: Tesco’s chief executive, Ken Murphy
But, like many other long-term holders, she looks back to Tesco’s share price heyday in 2007, when the stock topped £4.90, and asks, will those glory days ever return?
Recent stock market performance has been promising. The shares are up 50 per cent since September 2022, buoyed by rising sales, climbing profits and increasing confidence from chief executive Ken Murphy.
Earlier this month, Murphy declared that not only is Tesco grabbing share from rivals but customers are shopping more often and buying more products when they do.
Independent data from grocery guru, Kantar proves Murphy’s point.
Tesco accounts for almost 28 per cent of the UK food retail market, way ahead of Sainsbury’s at 15 per cent, and comfortably in front of every other pretender too, including Aldi and Lidl.
Scale brings opportunity. The bigger Tesco becomes, the more clout Murphy has with suppliers, allowing him to keep prices low and profits high.
Clubcard is an invaluable resource too. Clocking up nearly three decades in service, the card identifies what shoppers like so Murphy can tailor his offer and send special promotions to individual customers.
At the top: Tesco accounts for almost 28% of the UK food retail market
Tesco Finest brings extra bling, as customers splash out on dishes such as Bourbon pulled beef and Sicilian tarts.
Warmer weather and the Euros add a further boost, driving purchases of bangers, beer and bottles of fizz.
Confidence is riding high. Brokers are looking for sales of more than £69billion for the year to February 2025, with profits approaching £2.4billion and a dividend of 13.1p.
Steady growth is expected the following year – revenues exceeding £70 billion, profits topping £2.5 billion and a hike in the dividend to 14.2p.
The group has launched a new venture too, Tesco Marketplace, a type of wannabe Amazon, where customers can buy everything from patio furniture to personal blenders and puppy prams, alongside the weekly food shop.
And, earlier this year, Murphy sold Tesco Bank to Barclays for around £700 million, promising to use the money to buy back shares, a move designed to boost the stock price.
Murphy can feel justly proud of recent achievements but, look a little further back and the picture is rather more mixed.
Rising inflation and the cost-of-living crisis took their toll on Tesco, sending the shares down to just £2.05 in September 2022.
Shareholders with long memories can also chart Tesco’s slow demise after the financial crisis, culminating in the 2014 accounting scandal, which saw the group fall into loss and come under investigation from the Serious Fraud Office.
Fortunately, those dark days are well behind it and the future seems much brighter under Murphy.
Having joined in 2020, the Irishman has won respect in the City for his work to date and his plans for the business. A recent £10million pay packet ruffled feathers in some quarters but few would deny he is delivering value to investors, customers and employees alike.
Midas verdict: Tesco shares have had a strong run lately but, at £3.09, there should be plenty more growth to come.
Economic conditions are improving, Murphy is ambitious and customers are responding with their wallets. Existing shareholders should sit tight. New investors might even grab a few and hope the stock heads up towards those halcyon days of 2007.
Mighty machine keeps shelves full
Planning to throw a few Tesco steaks on the barbecue this weekend? Chances are they have come from Hilton Food Group.
Hilton has been supplying Tesco with red meat cuts for 30 years and the relationship is stronger than ever. Initially focused on beef and lamb joints in the UK, Hilton now works with Tesco in Ireland and central Europe too and its range runs from prime steak to mince, fish cakes to fillets and many sophisticated ready-meals.
Strong bond: Hilton has been supplying Tesco with red meat cuts for 30 years
Tesco accounts for around a quarter of Hilton’s revenues but the group has spent the past two decades acquiring big-name customers overseas, adding new products and leading the charge on technology and innovation.
Robots are now used to cut and pack meat. Data specialists turn consumer preferences into tasty recipes. High-speed water jets slice salmon into neat little portions. Even fish cakes are made with machines.
Reliability, efficiency and clever ideas helped Hilton to deliver steady growth for years.
In 2022, however, soaring inflation and energy prices hit Hilton hard, particularly its nascent fish business. Two profit warnings ensued and the shares tumbled from £12.42 to £5.40 in a matter of months.
Steve Murrells was parachuted in as an adviser, becoming chief executive in July 2023. Boss of the Co-op from 2012, Murrells is credited with turning that business from an also-ran to one of Britain’s best-loved grocers. Now he is rolling up his sleeves at Hilton.
The fish business is firing on all cylinders after an overhaul of production in Grimsby. Profits rose 20 per cent to £66 million in 2023 and brokers expect continued growth this year, with earnings of £78million and a 6 per cent increase in the dividend to 33.8p.
Murrells is ambitious too, hoping to win more business from Tesco and long-term partners, while adding new customers.
Midas verdict: Midas first looked at Hilton Food Group in 2008, when the stock was just £1.70.
Today, Hilton Food Group shares are £8.99, a strong recovery from those 2022 lows but still some way off their high point. That should change. Murrells learnt his craft under legendary Tesco boss Sir Terry Leahy and Hilton shareholders should benefit.
Burn’s bags of potential
Coral Products is a small plastics business, based in Haydock, Merseyside.
But the firm has some high-profile customers, including Tesco, BT and the Ministry of Defence.
Coral supplies Tesco with film to keep bread and buns fresh, and chief executive Lance Burn is keen to expand the relationship.
Only last week, Tesco buyers were in Haydock, checking out new wares from Coral, such as salad bags and dried fruit pouches, which in the past have come from India. Merseyside is a lot closer to home, an obvious advantage.
Burn is new to Coral. Fresh from turning round giftware group IG Design, he arrived in January and was forced to issue a profits warning three weeks later.
He has been hard at work ever since, simplifying the group into two divisions. Flexible plastics include food packaging and biodegradable pint glasses, much loved at football games.
Rigid products are more industrial, from piping for telecom cables to recycled decking for barracks.
Burn’s strategy is starting to deliver results.
A trading update this month was encouraging and brokers expect decent growth in sales and profits for the year to next April, alongside a dividend of at least 0.5p.
Midas verdict: Coral Products has had a rough ride on the stock market, falling almost 20 per cent in the past year alone, to 13p. Burn is determined to put this UK manufacturer back on its feet, early signs are promising and the shares should respond. Buy.