Tesco issues profit warning

Shares in Tesco dropped 7.13 per cent on Friday (August 29th) morning after the supermarket issued a profit warning.

The company highlighted "challenging trading conditions" as one of the reasons why it revised its full-year profit forecast from £2.8 billion to £2.4 billion. Officials said in a statement that the group's financial performance would be affected by the figures, adding that the dropping sales have contributed to Tesco losing its market share.

Tesco stated that it would be cutting costs with capital expenditure expected to be capped at £2.1 billion, £400 million less than planned and £600 million less than the same period a year earlier. The supermarket has cut its half-year dividend by 75 per cent and expected this to result in a share price of 1.16p.

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

"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."

Supermarkets have been facing increased competition of late with the rise of discount stores such as Aldi and Lidl. The two have been making great strides to claim a market share at a time when the more established names are experiencing tough trading conditions. Both Morrisons and Asda have carried out restructuring schemes in recent months, leading to a range of redundancies.

Sainsbury's announced that it would be teaming up with Danish retailer Dansk Supermarked to relaunch Netto in the UK. The Scandinavian range of stores has not operated on British shores since 2010 but Sainsbury's believes that its reintroduction will help it better compete with Aldi and Lidl.

The new outlets are expected to be opened next year.

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