Tesco shares plummet as supermarket surprises with another profit warning

9th Dec 2014 07:05

Shares in Tesco plunged on Tuesday after the struggling supermarket chain published an unscheduled trading statement, guiding to at least a 58% drop in trading profits for the full year, much worse than feared.The company said that on the back of changes and investments made so far this year to improve customer service and implement new procedures, trading profit for the financial year ending February 2015 is not expected to exceed £1.4bn.This compares with a figure of £3.315bn the year before and analysts' forecasts which ranged from £1.8bn to £2.2bn.The stock was down 10% at 168.84p by 09:35, having fallen as much as 16% in early deals."If there had been hope that the market would be immune to yet another profit warning, this quickly evaporated as Tesco has provided profit guidance which is nearly 30% shy of an already lowered estimate," said Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers.The retailer also revealed that it would announce the results of new boss Dave Lewis' hotly-anticipated strategic review in its next trading update after Christmas."On the 8 January we will share more detail about the measures we plan to take to improve the competitiveness of the UK customer offer and to strengthen the balance sheet," Tesco said.The company said that early feedback from customers from recent improvements has been "encouraging" as it invested further in service, brought on over 6,000 new staff, increased product availability on key lines and slashed prices.Lewis has also recently shook up Tesco's management team in the aftermath of an accounting scandal that resulted in a £263m overstatement of profit in the first half. The Financial Conduct Authority is still investigating the issue."Whilst the steps we are taking to achieve this are impacting short-term profitability, they are essential to restoring the health of our business," Lewis said in Tuesday's statement."We still have much to do but are making good progress in developing our plans to improve the long-term positioning of the group and I will share more of that on the 8 January [...] For now, all the Tesco team is focused on delivering the best Christmas for customers."