Tesco Error Triggers New Profit Warning--Update

By Ed Ballard 

LONDON-- Tesco PLC has issued its fourth profit warning in three years and said it is investigating why it overstated its most recent profit forecast by GBP250 million ($408.8 million).

"We have uncovered a serious issue and have responded accordingly," Dave Lewis, the supermarket's newly-appointed chief executive, said on Monday. Mr. Lewis took on the role at the start of September, a month earlier than planned.

Last month. the U.K.'s largest retailer cut its profit guidance for the year to between GBP2.4 billion and GBP2.5 billion.

"The chairman and I have acted quickly to establish a comprehensive independent investigation," said Mr. Lewis.

"The board, my colleagues, our customers and I expect Tesco to operate with integrity and transparency and we will take decisive action as the results of the investigation become clear," he said.

Tesco's shares plunged in early trading Monday, falling as much as 11%.

The U.K. group, which vies with Carrefour SA of France for the position of world's second-largest retailer behind Wal-Mart Stores Inc., is struggling against fierce competition in its key home market.

Tesco now has issued three profit warnings in the past nine weeks as it tries to deal with price pressure in the U.K. grocery market, where the market share of Tesco and its large rivals is being eroded by no-frills competitors, as well as the effect of costly investments overseas.

At the time Tesco revised its profit outlook lower in August, the company also slashed its interim dividend by 75% and said it would reduce capital spending by GBP400 million to GBP2.5 billion as it slowed the rollout of new stores.

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