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Tesco’s Profit Warning Causes Fall in Share Price

Tesco’s Profit Warning Causes Fall in Share Price

Tesco Chief Executive, Dave Lewis, announced on Wednesday that Tesco’s pre-tax profit figure for the year was £162 million, a huge leap from the previous year’s £6.3 billion loss. However, Mr Lewis accompanied the news with a warning that the supermarket’s continued recovery would not be slower than expected. On this warning the share price, which had risen close to 30 per cent this year, dropped by almost 8 per cent to rest at 181p at the close of market. Mr Lewis blamed the profit warning on an uncertain, deflationary and challenging market.

In order to improve on last year’s momentous loss, Tesco has introduced a number of initiatives aimed at increasing customer footfall and sales. One of these initiatives has been the introduction of a new range of meat and produce products from fictional ‘farms’ that have replaced the everyday value range and aim to compete with Lidl and Aldi, the discounters that are challenging the ‘big four’s market share. Other activity that has contributed to the profit is the purchase of a number of stores to drive down rent costs. There has also been talk of selling off the Harris and Hoole coffee shop chain and the Giraffe restaurant chain to free up cash. Despite the improvements made, Tesco still has a long way to go to match the £4 billion it was achieving in profit only four years ago.

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