UK: Crisis-hit Tesco cuts dividend by 75%
- Credit: PA
The trading crisis at Tesco deepened today as it revealed another profits warning and slashed its dividend to shareholders by 75%.
The supermarket giant said its new chief executive Dave Lewis will now start work a month earlier than planned on Monday in order to commence a review of “every aspect” of the group’s operations.
Tesco said market conditions remained challenging as it cut its forecast for 2014/15 trading profits to between £2.4 billion and £2.5 billion, well below City forecasts and down on the £3.3 billion reported the previous year.
In a blow to many pension funds, Tesco said its half-year dividend for shareholders will be 1.16p per share - a cut of 75% on last year’s figure.
It will also slow its store refresh programme in order to cut annual capital expenditure to no more than £2.1 billion - £400 million less than originally planned and a reduction of £600 million on the previous financial year.
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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.”
Mr Lewis, a former Unilever executive, takes over from Philip Clarke, who was ousted last month after the company’s latest warning that profits will be “somewhat below expectations”.
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At the start of 2012, Mr Clarke shocked the market with the group’s first profits warning in 20 years. It prompted the launch of a £1 billion turnaround plan but latest annual results showed earnings down for the second year running.
Tesco has been caught in the grips of a price war driven by the growth of discount rivals Aldi and Lidl, and a squeeze on household budgets.
The company said today: “The combination of challenging trading conditions and ongoing investment in our customer offer has continued to impact the expected financial performance of the group.”