Shares in Tesco hit a new low as Standard & Poor’s cut its rating on the stock following last month's profit warning.
The move means it is a real baptism of fire for Unilever veteran David Lewis, who is replacing Philip Clarke as chief executive. News of his appointment was accompanied by the profit alert last month.
S&P cut its rating on the stock by one notch. ‘The downgrade reflects our view that Tesco's profitability will continue to weaken because market competition in the UK will remain persistently high, and even intensify, over the next 12 months,’ it said in its research note.
‘Tesco's market and financial positions have not tangibly improved, despite extensive restructuring and substantial spending on a long-term program to improve its stores and customer service.’
The news comes after HSBC gave a depressing outlook for Tesco earlier in the week.
‘Tesco needs to take drastic action to protect its future. We believe that UK operating profits need to more than halve to give Tesco a base on which to grow,’ the bank said.
HSBC also warned that Tesco could cuts its 2014 dividend by 50% to 7.25p.
Tesco, once the darling of the stockmarket, lost an additional 2% overnight to close at 243.8, its lowest level in 10 years.
Tesco chairman Sir Richard Broadbent is confident Lewis can turn this around.
‘Dave Lewis brings a wealth of international consumer experience and expertise in change management, business strategy, brand management and customer development,’ Broadbent said on his appointment.
‘He is already known to many people inside Tesco having worked with the business over many years in his roles at Unilever. The board believes that with Dave's leadership Tesco will sustain and improve its leading position in the retail market.’