Tesco issues new profit warning

<p>Shares in Tesco have dropped 16 per cent after the company posted another profit warning.</p>

Shares in major retailer Tesco have tumbled 16 per cent after the company issued another profit warning.

The supermarket giant said in its latest trading update that its group profit for the full financial year will fall short of previous estimations. Market analysts had predicted the firm to post profits of between £1.8 billion and £2.2 billion but Tesco confirmed that it will "not exceed £1.4 billion", far short of the previous estimates.

Tesco's share price opened 22.16 points down as of 08:50 GMT on Tuesday (December 9th) following the announcement. It came after a huge 16 per cent drop following the announcement but Tesco has confirmed that it is implementing new policies and procedures to repair the damage. It added that its "entire team" had been retrained with further invested in its current service.

Dave Lewis, Tesco chief executive officer, said: "Tesco is focused, and will continue to focus, on doing the right thing for customers. This means running our business in a way that everything we do creates sustainable value. Whilst the steps we are taking to achieve this are impacting short-term profitability, they are essential to restoring the health of our business."

Tesco faced huge criticism and was monitored by the Financial Reporting Council (FRC) after it admitted in September that it had overstated its half-year profit guidance by £250 million. The supermarket launched its own investigation and has since confirmed that it will be doing everything it can to ensure a problem of this ilk does not occur again.

The supermarkets have faced increased competition following the rise of discounters such as Aldi and Lidl. The two low-cost grocery stores have been gaining customers and market share putting pressure on the more traditional names. As Christmas approaches the supermarkets will be looking to claw back some ground on the discounters.

Find up to date information on spread betting strategies at City Index

Build your confidence risk free
Join our live webinars for the latest analysis and trading ideas. Register now

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.