Tesco loses even more of its market value as it reveals a bigger black hole in its books than expected and scraps its outlook. What next for the ailing supermarket giant? Hayley Platt reports.
Seven weeks in the job and Tesco chief Dave Lewis is firefighting on a mountainside of troubles. At the company's delayed first half-year results, Lewis said he can no longer provide a full-year profit forecast because he doesn't know the scale of the problems - or how much it will cost to fix them. It was revealed that the black hole in Tesco's accounts was 263 million pounds, 13 million more than first thought. UK sales in the same period fell over five per cent, pre-tax profits plunging by 92 percent. On top of that, chairman, Sir Richard Broadbent, announced he's to step down. The news sent shares down six percent to an 11-year low. Chris Beauchamp of IG. SOUNDBITE: Chris Beauchamp, IG, saying (English): "The fact that Tesco really has taken its eye off the ball off its core business over the past five years or so really. Dave Lewis has a major uphill task restoring confidence in the brand. He's outlined a basic strategy, but for the time being I think Tesco finds itself between a rock and a hard place. It needs to restore confidence while at the same time beginning to embark on a long term turnaround plan." At one time, every pound in 10 spent in the UK went through Tesco tills. But the cracks started to show in 2012 when it issued its first profit warning in 20 years. Since then it's tried to win back customers by cutting prices to compete with newer rivals Aldi and Lidl. A one billion pound revamp from 2012 failed to draw customers back. And the big out-of-town stores it championed are now out of fashion. It also faces a ballooning pensions deficit and widening debt. Lewis has a long to-do list. SOUNDBITE: Chris Beauchamp, IG, saying (English): "He needs time to build relationships with suppliers. Now being an ex-Unilever man that will be his forte. But also to rebuild trust with consumers, focus on the visit to stores being as a more pleasurable experience. And avoid complex discounting promotions in favour of clear predictable pricing that people can then put trust in the Tesco brand and know that they're getting a good deal because that's the most important thing." This month alone Tesco lost 20 percent of its market value. For his part, Lewis admits he has no quick answers. But the group is, it says, looking at all options to raise cash. Large shareholders have told Reuters they would prefer an asset sale before considering a rights issue.