Tesco issues profit warning as new boss Dave Lewis parachuted in month early

The supermarket giant said it expects annual trading profit to be in the range of £2.4bn to £2.5bn rather than the £2.7bn to £2.8bn previously forecast. Trading profit for the six months to August 23 is expected to be in the region of £1.1bn.

Tesco said the profit warning was triggered by a combination of “challenging” trading conditions and “ongoing investment in its customer offer”.

In addition, Dave Lewis, who succeeds Philip Clarke as chief executive, will start a month earlier than the originally scheduled date of October 1.

Tesco chairman Sir Richard Broadbent said: “The board’s priority is to improve the performance of the group. We have taken prudent and decisive action solely to that end.”  

Tesco revealed it is also cutting capital expenditure by a further £400m to a maximum of £2.1bn by slowing down its store refresh programme and savings made in its IT operations. The figure is £600m less than last year.

The grocer also said that it anticipates the dividend to be set at 1.16p per share, a 75%  fall from last year’s dividend.

Broadbent 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.”

Broadbent said that Lewis will review every aspect of the group’s operations when he joins to create value for customers and shareholders.