...Stretched Financial Risk Profile: Tesco PLC's Long-Term IDR of `BB+' reflects the weak near-term outlook for its core UK operations' profitability and resulting free cash flow (FCF). This leads to a financial risk profile more in line with the 'BB' rating category, balanced by stronger business fundamentals including leading scale. Fitch acknowledges that management has identified and will use strategic options to improve credit metrics, but these are subject to execution risks, reflected in the Negative Outlook. UK Business Turnaround Critical: Tesco's UK operating model is challenged by the structural pressures affecting the local food retail market. These include disruptive competition from hard discounters and overall changing consumer behaviour. However, Fitch recognises Tesco's encouraging efforts to adjust its business model, notably by improving its product offer, brand awareness and supplier relationships. Fitch views an improvement in the larger formats particularly important...
