Tesco profits crisis: Dave Lewis must do “whatever it takes”, says shareholder

Kasmira Jefford
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Newly installed Tesco chief executive Dave Lewis
Tesco could be forced to raise cash by way of a rights issue or by speeding up the sale of its UK and overseas assets, as the troubled supermarket chain launched a probe yesterday into a £250m black hole in its accounts.

The debacle prompted a pro­fits warning, which puts Tesco on course for trading profits of £850m in the first half of the year instead of the £1.1bn it had previously expected. It comes just weeks after an earlier warning as the giant spends heavily to compete with its discount rivals.

Tesco already slashed its interim dividend by 75 per cent last month to help fund the price offensive, and City analysts said the company might now have to find other means of paying for its mistakes. “Many issues remain unanswered and the possibility of a rescue rights issue should not be ignored,” HSBC’s head of consumer retail research Dave McCarthy said.

Tesco shareholder Investec Asset Man­agement said the latest blow to the group would allow new chief executive Dave Lewis to do “whatever it takes” to turn the business around, including selling assets.

“We think that is good as it probably brings forward mass simplification of the group, that is, selling inter­nat­ional assets, selling things like Dob­bies, closing things like Blinkbox and focusing 100 per cent on how to take on the discounters,” said Alastair Mun­dy, who manages an Investec fund.

Another banking source said: “I can see Tesco accelerating its divestment programme to provide a liquidity buffer. It has got businesses which it cannot turn around like Turkey and central Europe.”

But independent retail analyst Nick Bubb cautioned that selling assets was a double-edged sword: “The more they sell overseas the more exposed they are to the huge problems of the UK.”

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