Tesco boss Dave Lewis hits investors with new profit warning sending shares plunging

Dave Lewis insisted the long-term benefits to Tesco’s customers will outweigh the short-term effect on shareholders

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Tesco chief Dave Lewis hit investors with another profit warning as he revealed nearly a thousand staff have been retrained to prevent a repeat of its £263 million accounting fiasco.

Lewis used his 100th day in charge of the ailing supermarket to alert the City, which predicted profits for the country’s biggest supermarket could be just £15 million in the UK in the second half of the year.

Full-year profits will now be no more than £1.4 billion, a fall of 57 per cent on last year, with UK profits expected to be down by a staggering 96 per cent.

Lewis revealed that all 963 head office staff in its commercial division, which was the epicentre the scandal in which Tesco artificially inflated profits by £263 million, have been retrained.

He has banned unscrupulous tactics to boost sales in the final months before posting results, which had previously flattered the figures but left stores understaffed or shelves empty.

The latest revelation sent shares spiralling, at one point hitting 156.5p — within touching distance of the lowest level since 1997 shortly after Sir Terry Leahy became chief executive. They recovered slightly, but are still down 11 per cent at 167p.

Lewis said: “The decisions we take now have a short-term effect on our shareholders, and I regret that, but I think our proposition should be about investing in customers which will have long-term benefits.

“Everybody wants me to predict a time of the turnaround. Where I feel we need to be at the minute is to get back to core principles. I don’t have a crystal ball but we’ll keep our focus on the customer.”

Lewis said all internal investigations have now been completed but a Serious Fraud Office investigation continues. Eight directors were suspended, with one returning and four shown the door.

He said the remaining three, all from the buying department, will learn their fate shortly. Lewis took control of the UK but said today it would only be temporary and a permanent replacement would be made.

The company will give an update next month, at which Lewis is expected to lay out his plans for the supermarket’s future in more detail.

However, he revealed the supermarket had already starting cutting some prices on key products and increasing availability, suggesting early indications were positive.

An extra 6000 staff have been employed and Lewis is considering whether to extend head office placements in stores into the new year.

Lewis said the retailer will focus on making profits from stores.

Tesco’s woes sent shares in rivals Sainsbury’s and Morrisons falling.