Tesco shares plummet following profit warning

Tesco warned that its group trading profit for the full financial year is far below the expected £2.2bn.

15:58 09 December 2014

Tesco shares have nosedived by as much as 16per cent after the supermarket chain warned that its full-year profits will be substantially below market expectations. It was said that the profit is far below the expected £2.2bn.

The profit shortfall was blamed on changes with the way the company dealt with suppliers and taking on 6,000 new staff.

Tesco chief executive Dave Lewis 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.”

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.”

"While the steps we are taking... are impacting short-term profitability, they are essential to restoring the health of our business.”

Meanwhile, Cantor Fitzgerald analyst Mike Dennis proposed some measures to improve Tesco’s profit.

He said: "The CEO needs to simplify the business via UK and international asset sales, then reconnect with suppliers by changing payment terms and lowering his cost of goods and then start on the long road to rebuilding the Tesco brand with shoppers."