Tesco has slashed its profit forecast, rather than its prices, as it brought forward new chief David Lewis' joining date.
The supermarket giant estimated its profit for 2014-2015 will dip by £0.3 billion or £0.4 billion and would be £2.4 billion or £2.5 billion. The move came as it announced that Lewis, who joins from Unilever, will join as chief executive a month earlier and start on 1 September.
Tesco also forecast a 75% dividend cut could could be on the cards, as the board said it anticipated it would set the interim dividend at 1.16p per share. The company has also decided to cap capital expenditure at £2.1 billion, some £0.4 billion less than originally planned, representing a £0.6 billion decrease from the previous financial year. It said this will be achieved in a number of areas including IT and a slower roll-out of its store refresh programme.
The announcement caused the share price to tumble. At 09:14 it was down 6.5%, trading at 230.2p.
Sir Richard Broadbent, chairman, said: 'The board's priority is to improve the performance of the group. We have taken prudent and decisive action solely to that end. 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 actions announced today regarding capital expenditure and, in particular, dividends have not been taken lightly. They are considered steps which enable us to retain a strong financial position and strategic optionality.'