NEARLY £5bn was wiped off the value of Tesco yesterday after it issued a profit warning on the back of its worst Christmas in decades.
Shares in Britain’s biggest retailer fell by 16 per cent before closing down 15.99 per cent at 323.45p.
The firm shocked analysts when it said sales at British shops open over a year had dropped 2.3 per cent, excluding fuel and VAT, in the six weeks to 7 January. The City had been expecting a fall of around 0.9 per cent.
Chief executive Philip Clarke said: “We’ve driven productivity a bit too hard is the truth.”
The chain’s Big Price Drop campaign did not work out, as it brought in extra customers but too few to offset the drop in takings, while rivals issued money-off coupons in the run-up to Christmas.
Tesco has also begun to suffer because of its vast range of non-food items, which have been hit by shoppers cutting back on non-essential spending.
It said underlying profit before tax and earnings per share for 2011-12 would be broadly in line with analysts’ consensus forecasts but group trading profit growth is likely to be around the low end of the current range.
The update came a day after rival Sainsbury reported forecast-beating Christmas trading. Tesco had been one of Britain’s most consistent growth stories but Clarke wants to invest hundreds of millions of pounds in fixing what he described as “long-standing” problems in its home market.
It will invest in staff and products and continue the price-cutting campaign, as well as cutting back on openings of large hypermarkets in order to focus on faster-growing smaller stores and the internet.