LONDON – Tesco shares plunged 16 per cent Tuesday after the supermarket giant warned that its full-year profits will be significantly below market expectations as it invests in overhauling its business.
The company, one of the world’s biggest retailers, said trading profits for the year to February will not exceed 1.4 billion pounds ($2.2 billion), far below market forecasts of about 2 billion pounds.
The announcement was the fourth time this year that Tesco warned on profits. New Chief Executive Dave Lewis said the expected shortfall is the result of steps being taken to improve the company in the wake of an accounting scandal.
An investigation is underway into why Tesco’s half-year profit was overstated by some 250 million pounds. Eight executives were suspended amid the probe, which deepened the retailer’s troubles as it struggled to compete in Britain with low-cost rivals such as Aldi and Lidl.
Lewis said Tesco is investing in improving its service, taking on 6,000 new staff in stores, as well as changing the way it deals with suppliers.
“Whilst the steps we are taking to achieve this are impacting short-term profitability, they are essential to restoring the health of our business,” he said.