Dobbies garden centre chain could be sold by Tesco, says retail analyst

Struggling supermarket Tesco could sell off its peripheral businesses including Dobbies Garden Centres says retail analyst David Gray.

On Tesco’s Q2 results, Gray, retail analyst at Planet Retail, said: "I think with the new chief executive Dave Lewis at the helm and his priority to focus on core business he may look to sell some peripheral operations. Blinkbox and Tesco's Turkish business are obvious and also possibly Dobbies, which is quite peripheral to the core food business.

"Lewis says he's looking to concentrate in the UK food business. On the flip side, gardening products often fit quite well with grocery, which Waitrose has proved with its Alan Titchmarsh ranges. But with profitability falling, and the share price slashed, Tesco may have to do something drastic."

Gray says Wyevale Garden Centres owner Terra Firma could be interested, as could other private equity groups.

He added: "This morning’s results show how retail giant Tesco has been rocked to the core by the accounting scandal – with a string of key executives now on the suspended list and every painful twist and turn gleefully documented by both specialist and mainstream media. Not that they want for material, either. Like-for-like declines in almost all markets - including the UK – are now the norm for a company that seems bereft of any solution that might arrest its vertiginous decline.

"Although a UK recovery plan - remember that? - is still in place, even here investment is being yanked, meaning FY14 store refurbishment targets will now no longer be met. This is a major concern, considering more than half of the Express outlets and Tesco superstores have yet to be refreshed. New CEO Dave Lewis will, without question, have to consider selling peripheral businesses like the blinkbox movie streaming service or Dobbies garden centre chain to raise much-needed cash to put into store revamps.

He added: "But Tesco, although down right now, is not quite out cold yet. It remains the UKs most profitable grocer – for the time being at least. Not to mention one of the world’s biggest convenience store players. Whatever the chaos raging around Chesham HQ, Tesco continues to demonstrate adaptability in this channel – rolling out mini c-store formats across Korea and Thailand. Longer term, these will provide a growing revenue stream – providing a buffer against declines elsewhere. We expect Tesco’s global convenience store sales to rise to almost GBP11 billion by 2018, from GBP6.9 billion currently."

Tesco did not comment.

Source: Matthew Appleby - Horticulture Week
www.hortweek.com