Tesco issues profit warning and slashes dividend by 75%
Tesco suffered further fallout from the supermarket price war on Friday when it issued another profit warning and slashed its interim dividend by 75 per cent to 1.16p a share as it said that it 'continues to face a number of uncertainties'.
Its share price opened down 8.5 per cent at 225p on the news, its biggest fall in two-and-a-half years.
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Britain's largest retailer, which has struggled to counter the onslaught from discount stores, said profit for the 2014/15 year would be £2.4bn-£2.5bn, down from its previous forecast of £2.8bn. Trading profit for the six months ending August 23 would be around £1.1bn.
It also said Dave Lewis will join as chief executive a month earlier than planned, on September 1, and that it would cut capital expenditure by £400m to £2.1bn, resulting in a £600m reduction compared with last year.
The slowed store revamp programme and IT budget were named as areas that would be affected by the reduced spending.
The announcement extends a turbulent year for Tesco, marked by a series of profit warnings that culminated in Philip Clarke resignation as chief executive two months ago. Then the company said sales and trading profit in the first half of the year were 'somewhat below expectations'.
On Wednesday it said sales in the three months to August 17 fell 4 per cent, a much worse performance than its main rivals. Kantar Worldpanel said the supermarket's share of the grocery market fell to 28.8 per cent from 30.2 per cent a year ago.
Its share price is down 33.6 per cent over the past year. On Thursday it closed at 246.3p.
Sir Richard Broadbent, Tesco's chairman, said on Friday the 'prudent and decisive action' announced on Friday '[will] enable us to retain a strong financial position'.
'The Board's priority is to improve the performance of the group,' he said. 'We have taken solely to that end.'
He said Mr Lewis, a former Unilever director, 'will be reviewing every aspect of the Group's operations', adding this will include consideration of all options that create value for customers and shareholders'.
Other retailers' shares also opened lower on the back of Tesco, with J Sainsbury down 5.5 per cent at 287p, Wm Morrison 4.2 per cent lower at 179p and online food retailer Ocado 2.5 per cent down at 331p.
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