Tesco must stick to farming pledges amid profit warning

Tesco’s new boss must not let the retailer’s latest profit warning undo promises made to British farmers, says the NFU’s head of food and farming Phil Hudson.

The supermarket’s new chief executive Dave Lewis is to launch a review of the supermarket’s entire operations on Monday after the retailer downgraded its profit expectations for 2014-15 from £2.9bn to £2.4bn-2.5bn.

See also: Tesco struggles as Aldi grows market share

Mr Lewis will start his new role a month earlier than expected to review “all aspects of the Group in order to improve its competitive position,” said Tesco.

The review was likely to include supply chains, said Mr Hudson, so it was important that any changes made still honoured pledges to British farmers .

“There are commitments previously made and we would expect Tesco to adhere to these,” said Mr Hudson.

“Philip Clarke’s [ Tesco’s outgoing boss ] commitments were Tesco’s commitments – our job is to make sure they adhere to these.”

Mr Hudson added that he had not yet heard of pressures from Tesco’s shelf price cuts filtering down to the farmgate.

However, current conditions in the grocery market were creating extremely tough trading conditions, said Mr Hudson, and as a result the NFU was concerned about the general situation for its members.

Challenging trading conditions and investment in price cuts and other customer offerings were to blame for the profit downgrading, said Tesco

The flagging retailer issued a profit warning at the end of July and figures this week from Kantar Worldpanel revealed that the retailer had underperformed the UK grocery market by over 5% in the 12 weeks to 18 August.

“We have now lost count of the number of times that we have downgraded our forecasts for Tesco over the past three years,” said Darren Shirley, analyst at Shore Capital Stockbrokers.

“It is very disappointing to see this update, which fundamentally raises questions in our minds about the capability of the management under Mr Clarke at this once great company,” said Mr Shirley.

“As such, we expect, as part of a range of measures, there to be considerable senior management change under Mr. Lewis in time, as Tesco needs a world class top team to take it forward.”

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