Tesco shares plunge after profit warning
Tesco has warned its full-year profits will be substantially lower than market expectations.
The supermarket chain said its group trading profit “will not exceed £1.4bn”, considerably lower than the £1.8bn to £2.2bn expected by the markets.
This guidance follows its admission earlier this year that it had misstated profits by £263m. Its shares fell 16% following this, before recovering slightly.
Dave Lewis, the recently appointed chief executive, said changes to the way it deals with its suppliers and taking on 6,000 new staff were responsible for much of the expected profit shortfall.
He admitted Tesco’s relationship with suppliers had become “bent a little”, but said it had now retrained all 900 people involved in negotiation at any level and set “a new framework for how we expect the teams to operate”.
The firm said its new approach would “ensure that revenue recognition is transparent and appropriate”.
The Serious Fraud Office (SFO) is currently carrying out a criminal investigation into the accounting regularities at Tesco.
Eight executives were suspended while and investigation into the accounting regularities was carried out, and it is understood that four of the suspended executives have now left the company.
Tesco said it planned to update the market further on 8th January.