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Tesco profit warning sees stocks dive

UK supermarket Tesco is predicting its full-year profits will be a substantial £400-800 million below market expectations, prompting its stock price to nosedive by 16%.

An investigation into Tesco's accountancy practices also revealed the movement of payments to suit financial announcements (Photo:Wiki)
Tesco’s latest statement has delivered another hammer-blow to the company (Photo:Wiki)

The unscheduled statement released by the company has taken the market by surprise, with its stock price dropping 18p between markets opening this morning and the time of writing.

“On the basis of the changes and investments made to date we anticipate group trading profit for the financial year ending February 2015 will not exceed £1.4billion,” the statement read.

It is the latest piece of bad news for the supermarket, which is reeling from the repercussions of its £263m half-year profit overestimation earlier this year.

Citing this, the statement said, “In our interim results on 23 October we highlighted that full year profitability would be impacted by actions we may choose to take and that the commercial income overstatement would affect second half results as we revisited our plans with the new management team.”

Hinting at a clean break from the past, it continued, “We have retrained our entire team and begun the cascade with our suppliers.”

Dave Lewis, Tesco’s embattled CEO, commented alongside the company statement. He aimed to mitigate the negative impacts of the shake-up as “essential to restoring the health of our business.”

The company said it would reveal details of a fresh plan to turn around its fortunes and “strengthen its balance sheet” on 8 January.

Criticising the move, retail analyst Nick Bubb told BBC News, “Just when the market thought Tesco were prepared to tough it out for Xmas they go and announce a huge profit warning, flagging that full-year trading profits will not exceed £1.4bn, some 20% below recent expectations, because of unspecified actions to improve UK competitiveness.”


It is unclear whether the “new management team” means that Dan Jago – suspended director for beer, wine and spirits at the supermarket – has been dismissed by the company.

Several company executives remain suspended as the Serious Fraud Office investigates potential criminal acts involved with Tesco’s financial mishandling.

The drinks business reported recently that Jago, along with the remaining suspended executives, may by now have been dismissed by the company.

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