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Troubled British supermarket giant Tesco on Friday issued another profits warning and slashed its shareholder dividend by 75 percent, blaming challenging trade and high investment costs, AFP reports.
Troubled British supermarket giant Tesco on Friday issued another profits warning and slashed its shareholder dividend by 75 percent, blaming challenging trade and high investment costs, AFP reports.
In reaction to the dire trading update, Tesco shares plunged 8.0 percent to 226.6 pence in early deals on London's FTSE 100 index, which was up 0.23 percent.
Britain's biggest retailer added that new chief executive Dave Lewis will start on Monday -- one month earlier than planned -- in order to carry out a review of "every aspect" of the business.
Trading profit was forecast at between £2.4 billion and £2.5 billion ($4.0 billion and $4.2 billion, 3.0 billion euros and 3.15 billion euros) in the 2014/2015 financial year, Tesco said.
That was well below market expectations of between £2.7 billion and £2.8 billion, and was down on the £3.3 billion reported in the prior year.
Tesco also slashed its interim shareholder dividend by a hefty 75 percent to 1.16 pence per share, while total capital expenditure was cut by £400 million to no more than £2.1 billion.
Retailer facing 'uncertainties'
"The combination of challenging trading conditions and ongoing investment in our customer offer has continued to impact the expected financial performance of the group," it said in the statement.
"The business continues to face a number of uncertainties, including market conditions and the pace at which benefits from the investments we are making flow through in the second half and consequently the board has revised its outlook for the full year."
The retail giant added that new boss Lewis will review all aspects of the group "in order to improve its competitive position and deliver attractive, sustainable returns for shareholders".
Tesco, which faces intense competition in Britain from German-owned discount retailers and also from so-called supermarket price wars, had announced last month that outsider and Unilever executive Lewis would replace Philip Clarke.
"The board's priority is to improve the performance of the group. We have taken prudent and decisive action solely to that end," added Tesco chairman Richard Broadbent in Friday's statement.
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."
Clarke had shocked financial markets at the start of 2012 when he oversaw Tesco's first profits warning in 20 years.
That sparked a £1.0-billion turnaround plan to refresh its supermarket stores, but the group revealed in April that annual profits fell for the second year in a row.
Clarke was ousted last month after the group warned that profits would be "somewhat below expectations".
Discount chains flourish
Tesco has struggled in recent years in Britain, as recession-weary shoppers have turned to German-owned discount retailers Aldi and Lidl.
Discount chains boomed during the downturn as consumers tightened their belts to save cash, and remain popular despite the economy's strong recovery this year.
Tesco's profits have also been weighed down by fierce competition from its traditional supermarket rivals comprising Wal-Mart division Asda, Sainsbury's, Morrisons and Waitrose.
Over the past two years, Tesco decided to close its failed US division Fresh & Easy and to exit from Japan.
Tesco is the world's third-biggest supermarket group after France's Carrefour and global leader, US retailer Wal-Mart.
by Roland JACKSON
