Battered supermarket group Tesco has warned that profits will be substantially lower than expected, its fifth profits warning in 12 months.
Shares in the group tumbled 16% to 156p – a new 14–year low – and shares in other supermarket groups were also under pressure, with Morrisons falling 6% and Sainsbury’s down 4%.
The grim announcement shows the crisis at Britain’s biggest retailer is far from over and underscores what has been a disastrous year for the group. Tumbling sales and profits have coincided with a criminal investigation into accounting irregularities, and the resignation and sacking of a number of senior executives.
Chief executive Dave Lewis, who took over on 1 September, said he expects trading profit for the year ending February 2015 will be no more than £1.4bn. This is substantially below market expectations, which ranged from £1.8bn-£2.2bn, and a huge fall on the £3.3bn profits recorded last year.
Lewis, who marks his 100th day in the job on Tuesday, said: “We still have much to do but are making good progress in developing our plans to improve the long-term positioning of the group. Our priorities remain restoring competitiveness in the UK, protecting and strengthening the balance sheet and rebuilding trust and transparency.”
Lewis, who is under pressure to show the City how he will revive the UK’s number 1 supermarket, promised to present his strategy to investors on 8 January. At its peak, £1 in every £7 spent in the UK went into a Tesco till, but customers are deserting the retailer in droves for cheaper rivals.
Tesco is also being investigated by the Serious Fraud Office after it admitted it had overstated its profits by £264m, leading to the resignation of Tesco chair, Sir Richard Broadbent, and the departure of a number of senior executives.
Lewis said: “Tesco is focused, and will continue to focus, on doing the right thing for customers. This means running our business in a way that everything we do creates sustainable value. Whilst the steps we are taking to achieve this are impacting short-term profitability, they are essential to restoring the health of our business. We will not engage in short term actions that compromise in any way our offer for customers.”
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