Tesco, a British grocer has cut its profit forecast for the fourth time within 5 months. This was due to the costly measures made by its new boss so as to rebuild the company after a significant loss of customers and a recent accounting scandal.
The world’s third largest retailer, Tesco’s shares plunged 17% on Tuesday towards a 14-year low, wiping off over 2.5 billion pounds or 3.9 billion US dollars of its stock market estimate. This was after the company curbed its entire-year trading profit estimate by nearly one-third.
It’s expecting not more than 1.4 billion pounds for the 2014-15 trading profit, which is less than the average forecast of analysts of 1.94 billion pounds. In September, the company reported an exaggerated first-half profit by nearly 250 million pounds, which was later on raised to 263 million.
Tesco had two decades of continuous growth, but lost its way after a costly overseas expansion because it needed to address the increase of discount outlets, which resulted in customer shopping habit changes. It was also caused by the boom of online shopping and convenience stores that almost emptied its huge sites.
Company CEO Dave Lewis said the 500 million pounds used in rebuilding the company’s accounting policies, recruitment of additional staff, supplier relationships, reduction of product prices, and increase in the availability of its popular lines were the main bases of the new profit forecast.