esco has warned its full-year profits will be substantially below market expectations.
The supermarket chain said its group trading profit for the full financial year "will not exceed £1.4bn", far below the £1.8bn to £2.2bn range expected by markets.
The downgraded guidance follows its admission earlier this year that it had misstated its profits by £263m.
Its shares plunged 16% following the update, before recovering slightly.
Tesco chief executive Dave Lewis, who took the helm on 1 September, said changes to the way it deals with its suppliers and taking on 6,000 new staff were responsible for much of the expected profit shortfall.
"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.
Mr Lewis, a former Unilever executive, admitted Tesco's relationship with suppliers had become "bent a little", but said it had now retrained all 900 people involved in negotiations [with suppliers] at any level and set "a new framework for how we expect the teams to operate".
"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," he said.
"While the steps we are taking... are impacting short-term profitability, they are essential to restoring the health of our business," added Mr Lewis.
The firm said its new approach would "ensure that revenue recognition is transparent and appropriate".
In August, before the accounting irregularities came to light, Tesco had already cut its profit forecast for the year to £2.4bn from £2.8bn.
No comments:
Post a Comment