Tesco Plc’ share price down, warns on profit, cuts dividend by 75%

Tesco Plc, the biggest retailer in the UK, warned that it expects full-year profit to decline, and cut dividend by 75%, sending shares plummeting. The company also hastened the appointment of its new CEO, Dave Lewis.

“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,” the company said.

According to the companys statement, Tesco Plc expects a full-year trading profit from £2.4 billion ($3.98 billion) to £2.5 billion. In comparison, the analysts forecasts were of a range between £2.7 billion and £2.8 billion. The company said that it expects a trading profit of about £1.1 billion for the six months ending on August 23rd.

In addition, the company also revealed that that it intends to cut its dividend by 75%. Tesco said it is to reduce spending to no more than £2 billion this year ($3.5 billion). This is about £400 million less than it initially planned.

Moreover, according to the companys statement, Dave Lewis is to step in as Chief Executive Officer on September 1st, about a month earlier than it was originally planned. The retailer explained that Mr. Lewis will be “reviewing every aspect” of the companys business and he will also take into account all possibilities for future growth.

That Lewis will consider options “sounds a strong signal at international disposals. That should offer hope, but we expect the shares to fall markedly on the dividend cut,” John Kershaw, analyst at Exane BNP Paribas, said for Bloomberg.

Tesco Plc lost 6.57% to trade at GBX 230.12 per share by 7:55 GMT, marking a one year change of -38.14%. As of the previous closing price, the company is valued at £20.01 billion (~$33.18bn). According to the Financial Times, the 18 analysts offering 12-month price targets for Tesco Plc have a median target of GBX 285.00, with a high estimate of GBX 360.00 and a low estimate of GBX 195.00. The median estimate represents a 15.71% increase from the last price of GBX 246.30.