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Tesco issues massive profits warnings as share price plunges | Tesco issues massive profits warnings as share price plunges |
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Battered UK 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 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. | 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. |
The group’s chief executive, Dave Lewis, who took over on 1 September, said he expected trading profit for the year ending February 2015 would be no more than £1.4bn. This is substantially below market expectations, which ranged from £1.8bn to £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 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 No 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 the Tesco chairman, 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.” |