News Column

Tesco issues third profit warning of 2014 with dividend slashed by 75%

August 30, 2014

Julia Kollewe,

Incoming Tesco boss Dave Lewis has his work cut out as Britain's biggest supermarket chain issued another profit warning and slashed its dividend by 75%.

The retailer announced that the Unilever executive the first outsider to lead the business will start on Monday, a month earlier than expected.

Tesco now expects to make a trading profit of 2.4bn to 2.5bn for 2014/15, down from the previously forecast 2.8bn. Trading profit for the six months to 23 August is forecast at 1.1bn and the company has cut its interim dividend by 75% to 1.116p a share. Tesco is also ploughing 400m less into the business than planned, estimating capital spending of 2.1bn this year, through savings in IT and the slower rollout of new stores.

Tesco's previous profit warning in July prompted the shock departure of Lewis' predecessor Philip Clarke, who tried and failed to stop shoppers defecting to discounters Aldi and Lidl during his three-year tenure. Lewis, who until now headed up Unilever's personal care business, has been described by Tesco as a turnaround specialist.

Sir Richard Broadbent, the chairman, said Lewis "will be reviewing every aspect of the group's operations. This will include consideration of all options that create value for customers and shareholders."

He added: "The actions announced today regarding capital expenditure and, in particular, dividends have not been taken lightly. They are considered steps which enable us to retain a strong financial position and strategic optionality."

Three years ago, when Clarke took over from Sir Terry Leahy, Tesco made record profits of 3.8bn. But its crown as the UK's most successful retailer soon slipped as the supermarket's Big Price Drop backfired and the company was forced to sell up in Japan and the US. Last year, Tesco revealed its first annual profit drop in 20 years.

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Source: Guardian Web

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