Tesco cuts dividend by 75% as new chief brought in early

Britain’s biggest retailer Tesco has slashed its interim dividend by 75%, as tough trading conditions forced it to cut its profit forecast for the second time in two months.

Tesco, which warned on profits in July as it ousted chief executive Phil Clarke, also said his replacement Dave Lewis would start on Monday, one month earlier than expected, and with a remit for a major review of the company.

Mr Lewis will get more financial flexibility from the dividend cut to 1.16p per share and also from a £400m (€504m) reduction in the retailer’s capital spending plan as the group scales back investment in store roll-outs and IT.

Shares in Tesco, which have been languishing at 10-year lows, slumped 8.5% on the news; its biggest one-day drop in two and a half years.

“The board’s priority is to improve the performance of the group,” said chairman Richard Broadbent.

“Our new chief executive, Dave Lewis, will now be joining the business on Monday and will be reviewing every aspect of the group’s operations.

“This will include consideration of all options that create value for customers and shareholders.”

The 95-year-old group has been battling fierce competition at the lower and upper end of the market.

“A dividend cut of this degree underlines the extent of the problems Tesco is facing,” Phil Dorrell, director of consultants Retail Remedy, said. “Throw in the fact that Dave Lewis is being parachuted in a month early and you have a grocer that is truly on the rack.”

Reuters