CHESHUNT (dpa-AFX) - Shares of Tesco Plc. (TSCO.L, TSCDY.PK) declined around 9 percent in early morning trading on the London stock exchange after the British supermarket chain warned Friday of lower trading profit for its first half and full-year 2015, citing ongoing challenging trading conditions as well as its continuing investment in customer offer. The company also reduced its interim dividend by 75 percent, and also cut forecast for capital expenditure.
According to the firm, its business continues to face a number of uncertainties, including market conditions.
Accordingly, for the first half ending August 23, the company expects trading profit to be in the region of 1.1 billion pounds compared with last year's 1.588 billion pounds.
Further, for fiscal 2014, the company now expects trading profit to be in the range of 2.4 billion pounds to 2.5 billion pounds as against last year's profit of 3.32 billion pounds, with trading margin of 5.17 percent.
In mid July, Tesco had warned that first-half sales and trading profit were somewhat below expectations as the trading conditions were more challenging than expected earlier. Following this, Philip Clarke, chief executive officer, decided to step down.
The company then had noted that the outlook for the full year would be influenced by the extent to which benefits from the investments the firm is making begin to be seen.
In early June, the supermarket chain had reported decreased sales for the first quarter, as price reductions impacted near-term performance, amid the challenging consumer trends in the UK.
Tesco's Board expects to set the interim dividend at 1.16 pence per share, a reduction of 75 percent from last year's interim dividend.
Additionally, for the current financial year, capital expenditure will now be no more than 2.1 billion pounds, some 0.4 billion pounds less than originally planned.
Richard Broadbent, Chairman, said, 'The Board's priority is to improve the performance of the Group..... The actions announced today regarding capital expenditure and, in particular, dividends have not been taken lightly. They are considered steps which enable us to retain a strong financial position and strategic optionality.'
Broadbent added that the firm's new Chief Executive, Dave Lewis, will join the business on Monday.
Lewis succeeds Clarke, who has been with Tesco for over the last four decades. Lewis comes from Anglo-Dutch consumer goods giant Unilever Plc (UN, ULVR.L, UL), where he most recently was Global President, Personal Care.
In London, Tesco shares were losing 21.17 pence or 8.6 percent, and trading at 225.13 pence.
Copyright RTT News/dpa-AFX