Today I'm looking at two FTSE 100(INDEXFTSE: UKX) plays in danger of becoming 'yesterday's news'.
Suggesting that British retail behemoth Tesco(LSE: TSCO) could be on the cusp of implosion would have been dismissed as crazy talk just a few years ago.
But the Cheshunt chain's inability to fight back against the competition is startling. While massive brand investment by fellow 'established' operator Sainsbury's has helped lessen the impact of rampant market fragmentation, Tesco's recovery strategies -- such as introducing a range of 'Farm Brands' in March -- have proved wholly ineffective.
Rather, Tesco has been drawn into an earnings-crushing price war to stem the progress of Aldi and Lidl. But these measures are doing little to resuscitate sales, as evidenced by recent Kantar Worldpanel data that showed revenues slipped 1% in the 12 weeks to 22 May.
And Tesco's road to recovery has been made even more difficult by Amazon's decision to enter the British grocery market.
The US giant -- which has already agreed to sell Morrisons' wares through its online portal -- on Thursday started to sell fresh foods to customers in parts of London through its Amazon Fresh service.
Customers can choose from more than 130,000 items, and Amazon plans to roll the scheme out nationwide. The move undermines the outlook of Tesco's own internet channel, naturally, at present the company's only strong growth lever in light of collapsing footfall in its megastores.
I believe Tesco faces an almost impossible task to return to former glories. And a prospective P/E rating of 24.2 times fails to reflect the risk of ongoing earnings woes, in my opinion.
Set to sink?
The possibility of protracted earnings pain also makes Royal Dutch Shell (LSE: RDSB) a gamble too far, in my opinion.
At face value, charging oil prices may be at odds with my bearish take on the state of the market. Indeed, the Brent index surged above the $52 per barrel marker for the first time since October this week, helped by supply disruptions in Nigeria and a weaker US dollar.
However, the long-term outlook for crude values remains on thin ice, in my opinion. Production from OPEC and Russia continues to blast higher, while patchy economic growth means that bloated inventory levels are likely to persist, a situation that could send black gold prices sinking again.
And Shell isn't doing its long-term prospects any good, either, as it aggressively sheds assets and cuts costs in a bid to protect the balance sheet. The fossil fuel giant plans to sell $30bn worth of projects during the next two years, a strategy that's likely to hamper earnings growth once the supply imbalance shrinks and crude prices charge higher.
Given Shell's patchy profits outlook for the near term and beyond, I reckon an expensive forward P/E multiple of 22.3 times is difficult to justify.
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Royston Wild has no position in any shares mentioned. The Motley Fool UK owns shares of and has recommended Amazon.com. The Motley Fool UK has recommended Royal Dutch Shell B. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.