Tesco's shares are "dead money at best", Santander downgrades

2nd Sep 2014 13:20

Santander has downgraded its recommendation for Tesco from 'buy' to 'hold' in the aftermath of last week's profit warning and dividend cut.Tesco said on Friday that trading profits for the full year will be £2.4bn-£2.5bn, below the previous guidance of £2.8bn, while the interim dividend will be cut by 75% and capital expenditure for this year will be £400m less than originally planned at £2.1bn.The supermarket giant also surprised the market by announced that new chief executive officer (CEO) Dave Lewis would be starting his job a month early."The fact that the interim has been cut so drastically and the new CEO arrives a month ahead of plan underlines the urgency of the situation," said Santander analyst Tim Attenborough.Nevertheless, he said that with the new chief financial officer Alan Stewart not joining until December and an initial 'honeymoon' review period likely, "we do not expect any major news until next year"."We continue to believe that there is real deep value in Tesco on a longer term basis, but for the next six months we see the shares as dead money at best."Attenborough said that Lewis has an "enormous and urgent task ahead".Santander has slashed its target price for the stock from 360p to just 260p.BC