Today Im looking at the bounceback potential of two battered FTSE 100 giants.
Retailer on the rack
The steady collapse of supermarket colossus Tesco (LSE: TSCO) has arguably been the British stock market story of recent times.
From shaping the British retail landscape as recently as the turn of the decade it was once estimated that 1 out of every 8 found itself landing in Tescos tills the companys inability to fight back against the new breed of supermarkets is nothing short of astonishing.
The horsemeat scandal in the summer of 2013 did nothing to help the firms appeal to British shoppers, but it did underline the extent to which Tesco had taken its eye off the ball in the UK market as it sought out global domination. And the less said about the Cheshunts firm failure in the US, Japan and South Korea the better.
The arrival of Aldi and Lidl has been the major seismic event in Tescos downturn, the low-cost chainsgreedily grabbing market share by aggressively undercutting the UKs established playersin the price stakes. Indeed, their combined take of the grocery segment now stands at a record 10%.
One would think Tescos multi-decade dominance of the grocery sector would have furnished the firm with the expertise, not to mention the financial clout, to see off the plucky minnows. But instead the business has been dragged into a bloody and subsequently earnings-crushing price war to rebuild its battered customer base.
Even the appointment of Unilever veteran Dave Lewis back in 2014 has failed to throw up any fresh ideas with which to reinvigorate Tescos revenues outlook.
Tesco is undoubtedly facing a crisis of identity as price-conscious shoppers flock to the budget outlets, while those seeking better quality head to Waitrose, Marks & Spencer and even mid-tier rival Sainsburys. Indeed, a disappointing Christmas saw Tescos market share fall a further 0.8% in the three months to 3 January, to 28.3%, according to Kantar Worldpanel.
And with both discount and premium chains embarking on ambitious store-building and online grocery initiatives, I reckon Tescos troubles are likely to get far worse before they get better.
Digger in dire straits
Likewise, I reckon diversified mining giant Glencores (LSE: GLEN) revenues performance is set for further heavy weather, this time as global commodity markets continue to struggle.
The post-2015 washout of raw material prices has been prompted by fresh waves of disappointing macroeconomic data from commodities glutton China. But this phenomenon is nothing new of course. Indeed, wave after wave of fresh stimulus from the Peoples Bank of China in recent years has fallen woefully short, leading many to question when the Asian powerhouse will begin to turn higher again.
At the same time, producers across Glencores main commodity markets remain committed to increasing output in a bid to offset falling prices with higher volumes. The Swiss business attempted to take the lead by cutting copper, coal and zinc production last year, but so far the wider industry has failed to follow suit and soothe the worsening supply/demand imbalances.
Glencore has worked hard to ride out the storm enveloping the commodities space, disposing of the dividend, cutting capital expenditure and raising cash to protect the balance sheet.
But while material prices continue to languish global bellwethers oil and copper both sank to fresh multi-year lows this month such measures will prove nothing more than a temporary sticking plaster, in my opinion. I believe Glencore can expect further earnings pain well into the future.
Royston Wild has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.