Dividend fears hit Tesco shares

Kasmira Jefford
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SHARES in Tesco slumped nearly four per cent yesterday on fears that dividends could be cut as analysts called for a complete overhaul in strategy under its new chief executive.

JP Morgan analysts said Unilever director Dave Lewis, due to take over from Philip Clarke in October, would have to reset its UK margins from this year by around 200 basis points to make its prices more competitive and win back shoppers defecting to discounters.

In a 25-page note, the broker urged Tesco to simplify its ranges, halve the number of promotions and cut prices of its own-brand products to narrow the gap with Asda prices to one per cent from around four per cent today.

It expects Sainsbury’s and Morrisons to follow suit with margin resets and for all three grocers eventually to make cuts to their dividend.