Bloomberg News
Tesco Plc will cut its dividend by 75 percent and rein in spending as it reduced expectations for full-year profit a month after ousting its chief executive officer. The stock fell as much as 9.1 percent.
The U.K.'s largest retailer will reduce spending to no more than 2.1 billion pounds this year ($3.5 billion), which is about 400 million pounds less than originally planned, the Cheshunt, England-based company said today in a statement. The interim dividend will be 1.16 pence per share. Profit this year will be between 2.4 billion pounds and 2.5 billion pounds, it said, trailing a consensus analyst forecast collected by the company of at least 2.7 billion pounds.
Dave Lewis's starting date as chief executive officer has been advanced to Sept. 1, a month earlier than anticipated, and he will be 'reviewing every aspect' of the business and consider all options to create value. Today's statement comes after Tesco had its worst sales decline in more than two decades, when revenue dropped 4 percent in the 12 weeks to Aug. 17, Kantar Worldpanel data showed this month.
That Lewis will consider options 'sounds a strong signal at international disposals,' said John Kershaw, an analyst at Exane BNP Paribas. 'That should offer hope, but we expect the shares to fall markedly on the dividend cut.'
The shares traded 8 percent lower at 226.55 pence as of 8:07 a.m. in London. The intraday decline was the steepest since Jan. 12, 2012, the day Tesco cut its profit outlook.
Tesco will reduce spending in areas including information technology and the store refurbishments. Under CEO Philip Clarke, who will step down from the board as Lewis joins, the company was investing in remaking stores, adding children's playgrounds, artisan bakeries and Zumba dance classes to lure back customers who had defected to cheaper rivals. Clarke was also spending on building a technology ecosystem of tablets and online media to lock in customers to the Tesco world.
To contact the reporter on this story: Celeste Perri in Amsterdam at cperri@bloomberg.net
To contact the editors responsible for this story: Celeste Perri at cperri@bloomberg.net Thomas Mulier
Posted by Unknown on Friday, August 29, 2014 - Rating: 4.5
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