British grocer Tesco has cut profit expectations for the fourth time this year, blaming the cost of trying to recover from an accounting scandal and a slide in market share. Shares in the world's third-biggest retailer plunged as much as 17 percent to a 14-year low on December 09, after it said group trading profit for the year ending February 2015 would not exceed 1.4 billion pounds ($2.2 billion).
That is almost 30 percent below analysts' average forecast of 1.94 billion pounds. After two decades of uninterrupted growth, Tesco lost its way as it concentrated on a costly and, in the case of the United States and Japan unsuccessful, expansion abroad.
It was slow to respond to changing shopping habits such as the rise of discounters, convenience stores and online shopping that hit its reliance on huge out-of-town stores.
And its problems were compounded in September when new chief executive Dave Lewis reported the company had overstated expected first-half profits by 250 million pounds - a figure later raised to 263 million pounds.
Bernstein analyst Bruno Monteyne said most commentators had assumed next financial year would be the trough for Tesco's profits, as it battles to recover from the biggest crisis in its 95-year history.
Tesco said that in recent weeks it had taken steps to improve its customer offer, investing further in service, with more than 6,000 new staff in stores, better product availability on key lines and keener prices.
"The early feedback from customers is encouraging," it said.
It said it would provide more detail about the measures it planned to take to improve competitiveness and to strengthen its balance sheet in its Christmas trading update on January 8.
"Our priorities remain restoring competitiveness in the UK, protecting and strengthening the balance sheet and rebuilding trust and transparency," said Lewis.
The accounting scandal, relating to supplier payments, led to the suspension of eight senior members of staff, including UK managing director Chris Bush, and sparked a series of investigations, including by Britain's Serious Fraud Officer and possible investor lawsuits in Britain and the United States.
Last week Lewis, who joined after a 27-year career at consumer products group Unilever, took direct control of Tesco's UK business which is facing particularly tough trading conditions.
Industry data published last month showed Tesco's UK sales, which account for two thirds of group revenues, falling at a greater rate than any of its main rivals - Asda, Sainsbury's and Morrisons - as it continues to lose market share to German discounters Aldi and Lidl.
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