Tesco shares rose to their highest level for a month after the company announced the departure of chief executive Philip Clarke amid another profit warning.
Investors saw the announcement that Unilever’s Dave Lewis is to take the helm as a sign of positive change at the beleaguered retailer, with Tesco trading up 2.3% to 291.5p by late-morning and rivals Sainsbury’s and Morrisons slipping back by 1.2% and 2.3% respectively.
The company this morning stated: “Current trading conditions are more challenging than we anticipated… this means that sales and trading profit in the first half of the year are somewhat below expectations.”
Deciphering the figures behind the guidance, Shore Capital’s Clive Black estimated that full year earnings are likely to be downgraded by 5-10% following the statement, while HSBC’s David McCarthy now expects profits for the first half are coming in around 10% lower than expectations.
Analysts at Bernstein expect the supermarket’s trading profit margin to come under further pressure this year, falling way below the 5.1% it achieved in 2013/14. Bernstein analysts wrote: “Reading through the thick of this statement, and the need to change CEO, seems to indicate to us that Tesco might be going south of 4.0% this year”.
Current analyst forecasts suggest Tesco’s full-year sales will be only marginally lower in 2014/15 (0.7% down year-on-year), but the fall in underlying pre-tax profit is predicted to be 11.5%.
Tesco has lost over 20% of its value since September 2013. The company’s share price was at approximately 400p when Clarke took over from Sir Terry Leahy in March 2011.
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