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GuruFocus has detected 2 Warning Signs with Tesco PLC \$TSCDY.
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Tesco PLC (OTCPK:TSCDY)
Gross Profit
\$3,628 Mil (TTM As of Feb. 2017)

Tesco PLC's gross profit for the six months ended in Feb. 2017 was \$1,949 Mil. Tesco PLC's gross profit for the trailing twelve months (TTM) ended in Feb. 2017 was \$3,628 Mil.

Gross Margin is calculated as gross profit divided by its revenue. Tesco PLC's gross profit for the six months ended in Feb. 2017 was \$1,949 Mil. Tesco PLC's revenue for the six months ended in Feb. 2017 was \$35,724 Mil. Therefore, Tesco PLC's Gross Margin for the quarter that ended in Feb. 2017 was 5.46%.

Tesco PLC had a gross margin of 5.46% for the quarter that ended in Feb. 2017 => No sustainable competitive advantage

During the past 13 years, the highest Gross Margin of Tesco PLC was 8.48%. The lowest was -3.87%. And the median was 7.11%.

Definition

Gross Profit is the different between the sale prices and the cost of buying or producing the goods.

Tesco PLC's Gross Profit for the fiscal year that ended in Feb. 2017 is calculated as

 Gross Profit (A: Feb. 2017 ) = Revenue - Cost of Goods Sold = 69896.25 - 66268.75 = 3,628

Tesco PLC's Gross Profit for the quarter that ended in Feb. 2017 is calculated as

 Gross Profit (Q: Feb. 2017 ) = Revenue - Cost of Goods Sold = 35723.75 - 33775 = 1,949

For company reported semi-annually, GuruFocus uses latest annual data as the TTM data. Tesco PLC Gross Profit for the trailing twelve months (TTM) ended in Feb. 2017 was \$3,628 Mil.

Gross Profit is the numerator in the calculation of Gross Margin:

Tesco PLC's Gross Margin for the quarter that ended in Feb. 2017 is calculated as

 Gross Margin (Q: Feb. 2017 ) = Gross Profit (Q: Feb. 2017 ) / Revenue (Q: Feb. 2017 ) = (Revenue - Cost of Goods Sold) / Revenue = 1,949 / 35723.75 = 5.46 %

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

A positive Gross Profit is only the first step for a company to make a net profit. The gross profit needs to be big enough to also cover related labor, equipment, rental, marketing/advertising, research and development and a lot of other costs in selling the products.

Explanation

Warren Buffett believes that firms with excellent long term economics tend to have consistently higher margins.

Durable competitive advantage creates a high Gross Margin because of the freedom to price in excess of cost. Companies can be categorized by their Gross Margin

1. Greater than 40% = Durable competitive advantage
2. Less than 40% = Competition eroding margins
3. Less than 20% = no sustainable competitive advantage
Consistency of Gross Margin is key

Tesco PLC had a gross margin of 5.46% for the quarter that ended in Feb. 2017 => No sustainable competitive advantage

Related Terms

Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

Tesco PLC Annual Data

 Feb08 Feb09 Feb10 Feb11 Feb12 Feb13 Feb14 Feb15 Feb16 Feb17 Gross_Profit 7,132 6,039 7,198 8,266 8,526 6,430 6,639 -3,379 4,077 3,628

Tesco PLC Semi-Annual Data

 Aug12 Feb13 Aug13 Feb14 Aug14 Feb15 Aug15 Feb16 Aug16 Feb17 Gross_Profit 3,742 2,746 3,631 2,762 1,801 -5,034 1,992 2,250 1,760 1,949
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