Tesco shares fall after profit warning

Published on: 10th December 2014

Tesco has warned its full-year profits will be below market expectations. Shares dropped by Tesco 30016% following the update, before recovering slightly.

The supermarket chain said its group trading profit for the full financial year “will not exceed £1.4bn.” The profit expected to be reached by markets is within the £1.8bn to £2.2bn range.

Earlier this year the company admitted that it had misstated its profits by £263m.

Dave Lewis, Tesco chief executive, said: “We have taken a very deliberate decision not to take short-term measures that would close the profitability gap in the short term, but would not improve relations with customers and suppliers.”

Lewis also said that Tesco’s relationship with suppliers had become “bent a little”, but explained it had now retrained all 900 people involved in negotiations (with suppliers) at any level and set “a new framework for how we expect the teams to operate.”

He added: “It does imply we are trying to make more on the front margin rather than the back margin, on how we sell rather than how we buy. It’s a much more efficient model for everybody.” Lewis continued: “While the steps we are taking… are impacting short-term profitability, they are essential to restoring the health of our business.”


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