Tesco speeds up CEO succession after profit warning, dividend cut
- New CEO to join sooner than planned
- FY trading profit to fall by as much as 27%
- Interim dividend to be cut by 75%
- Capex guidance reduced
The pressure is on for new boss Dave Lewis at Tesco after the struggling grocery giant said on Friday that it expects profits to fall by as much as 27% this year and its interim dividend to be cut by 75%.
Lewis, due to take over from Philip Clarke who announced his resignation in July, will now join the group one month earlier than planned on 1 September.
He is tasked with "reviewing all aspects of the group in order to improve its competitive position and deliver attractive, sustainable returns for shareholders", Tesco said in a statement.
In a second-quarter trading update, the supermarket chain said that ongoing investment and relentless challenging trading conditions has continued to impact its financial performance.
"The business continues to face a number of uncertainties, including market conditions and the pace at which benefits from the investments we are making flow through in the second half and consequently the board has revised its outlook for the full year," the statement read.
It now expects trading profit to be between £2.4bn and £2.5bn for the year ending 22 February 2015, down from £3.3bn the year before and well below its previous guidance of £2.8bn. Trading profit in the first half ended 23 August is forecast to be around £1.1bn.
Furthermore, the board said it anticipates to set the dividend for the first half at 1.16p per share, down from the 4.63p per share paid out at the half-year stage last year.
Tesco said it expects capital expenditure for the current financial year to be £2.1bn, £0.4bn lower than previously planned and £0.6bn below last year, through less investment in IT and a slower roll-out of its store refresh programme.
"The actions announced today regarding capital expenditure and, in particular, dividends have not been taken lightly," said chairman Richard Broadbent.
"They are considered steps which enable us to retain a strong financial position and strategic optionality."
Interim results are due out on 1 October.
BC