Tesco shares drop on profit warning

Shares in Tesco reached an 11-year low after the firm cut its full-year profit forecast to £2.4 billion from £2.8 billion, reports BBC.

In a statement, the supermarket said the "challenging trading conditions" would affect the group's financial performance. Sales have been sliding and it has been losing market share.

The start date for the new chief executive Dave Lewis has been brought forward to Monday.

The half-year dividend has also been slashed by 75 per cent compared with last year.

Tesco said it anticipated a dividend of 1.16p per share. This represents a saving to the company of about £600 million.

In addition, Tesco said it would cut costs. Spending on the business for the current financial year will be no more than £2.1 billion, which is £400 million less than planned and £600 million less than last year. IT will be affected and plans to refurbish its stores will be slowed.

"The Board's priority is to improve the performance of the Group. We have taken prudent and decisive action solely to that end," said chairman Sir Richard Broadbent.

"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," he added.

In early trading, Tesco shares plunged nearly 8 per cent to 226.70p, the lowest level in 11 years, but they later recovered somewhat and were 4 per cent down on yesterday's close. Other supermarket shares - Sainsbury's and Morrisons - also fell.