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More problems for supermarket group

Tesco shares crash after latest profit warning

Dave Lewis Troubled supermarket group Tesco saw 14% wiped off its shares in early trade after issuing another profit warning in an unscheduled update. They have clawed back to trade at 7% lower.

The company  is now guiding the market to expect least a 58% drop in trading profits for the full year, its fourth profit warning since early 2012.

Tesco 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 £1.4 billion. This compares with a trading profit of £3.315bn previously and 30% below analysts’ forecasts of £1.8bn-2.2bn.

The plunge in the share price came on the 100th day in office for new chief executive Dave Lewis (pictured). In a recent management shake-up it was announced he will take over the day-to-day running of the UK business on 1 January. Tesco Bank chief executive Benny Higgins also takes on a key strategic role which may, in the long term, involve flotation of the division.

Since Mr Lewis succeeded Philip Clarke,  £3.4bn has been wiped from Tesco’s value as the company lurches from one crisis to another.

It blamed the latest profits downgrade on the cost of overhauling internal structures, product lines and investments as it struggles to deal with changing shopping habits and rival discount chains such as Aldi and Lidl.
The company was also forced into an embarrassing withdrawal from the United States and a huge writedown in its UK property assets.

Last year it was hit by the horsemeat adulteration scandal and the Serious Fraud Office is investigating an accounting controversy, after it inaccurately recorded £250m as profit in its books.

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