Supermarket giant Tesco has admitted full year profits are set to be hammered by following revelations that it had overstated its accounts by £263m.
In a trading update to the London Stock Exchange, published today, the firm says its full-year profits will be no more than £1.4bn.
Markets had been expecting profits in the region of between £1.8bn and £2.2bn.
The news sent the company’s share price into freefall during early trading, dropping almost 15 per cent to £16.10.
It is down almost 45 per cent on a year earlier.
Tesco chief executive Dave Lewis says the interim results released in October had warned of a drop in profitability.
The company’s profits in the half-year to August were slashed 92 per cent to £112m after tax because of a £263m accounting black hole.
Lewis also announced a “new commercial approach” for the supermarket, saying more details will be released on 8 January.
He says the business will have stronger relationships with its suppliers, 6,000 more frontline staff, more products on shelves, and keener pricing.
In the statement, Tesco says: “On 8 January we will share more detail about the measures we plan to take to improve the competitiveness of the UK customer offer and to strengthen the balance sheet. On the basis of the changes and investments made to date we now anticipate group trading profit for the financial year ending February 2015 will not exceed £1.4bn.”
Lewis says: “Whilst the steps we are taking to achieve this are impacting short-term profitability, they are essential to restoring the health of our business.
“We will not engage in short-term actions that compromise in any way our offer for customers.”