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GuruFocus has detected 2 Warning Signs with Tesco PLC $TSCDY.
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Tesco PLC (OTCPK:TSCDY)
Retained Earnings
$415 Mil (As of Feb. 2017)

Retained earnings is the accumulated portion of net income that is not distributed to shareholders. Tesco PLC's retained earnings for the quarter that ended in Feb. 2017 was $415 Mil.

Tesco PLC's quarterly retained earnings declined from Feb. 2016 ($4,664 Mil) to Aug. 2016 ($-98 Mil) but then increased from Aug. 2016 ($-98 Mil) to Feb. 2017 ($415 Mil).

Tesco PLC's annual retained earnings increased from Feb. 2015 ($3,044 Mil) to Feb. 2016 ($4,664 Mil) but then declined from Feb. 2016 ($4,664 Mil) to Feb. 2017 ($415 Mil).


Definition

Retained Earnings is the accumulated portion of net income that is not distributed to shareholders. Because the net income was not distributed to shareholders, shareholders’ equity is increased by the same amount.

Of course, if a company loses, it is called retained losses, or accumulated losses.


Explanation

Historically profitable companies sometimes have negative retained earnings. This is because they have cumulatively paid out more to shareholders than they reported in profits.

For example, in 2011, Microsoft had negative retained earnings. This does not mean the company lost more money than it made over the years. It just means it paid out more money than it earned.

If a company has negative retained earnings, investors should check the 10-year financial results. They should not assume that negative retained earnings prove a company has generally lost money in the past.

Of course, many companies with negative retained earnings have indeed lost money in the past.

Retained Earnings: Warren Buffett’s Secret.

One of the most important indicators of durable competitive advantage. Net earnings can be paid out as dividends, used to buy back shares or retained for growth.

If the company loses more than it has accumulated, retained earnings is negative.

If a company isn’t adding to its retained earnings, it isn’t growing its net worth.

Rate of growth of retained earnings is good indicator whether it’s benefiting from a competitive advantage.

Microsoft is negative because it chose to buyback stock and pay dividends.

The more earnings retained, the faster it grows and increases growth rate for future earnings.


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

Feb08Feb09Feb10Feb11Feb12Feb13Feb14Feb15Feb16Feb17
Retained Earnings 13,49911,22114,61918,06019,21616,30816,1063,0444,664415

Tesco PLC Semi-Annual Data

Aug12Feb13Aug13Feb14Aug14Feb15Aug15Feb16Aug16Feb17
Retained Earnings 18,88516,30815,71216,10613,7803,0442,3994,664-98415
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