Tesco and the Analysts

I teach a lot of executives and they always complain that the City is so focused on the short term – the next quarter’s results, the profit made in the coming year. I usually counter by stating how much of the value of a company is not tied up in its short term performance but in its ability to survive and make normal profits in the long term. If you remove this value from any financial model, most companies look very sick and their share price over valued. So you ignore the longer term at your peril, but so many executives keep forgetting this.

I was really heartened to hear an analyst from HSBC talking about Tesco on Radio 4’s Today Programme this morning. The gist of his comment was that Tesco started to go wrong “6 or 7 years ago when they started to spend more time looking at pleasing the City rather than focusing on the needs of their customers”

Mike Bourne