Supermarket chain Tesco cut its profit forecast for the third time in three years and slashed its interim dividend by 75 per cent as tough operating conditions continued to ravage its business.

Tesco, which issued a profit warning in July as it announced the departure of its chief executive Phil Clarke, also said its new head Dave Lewis would start on Monday, one month earlier than expected, and launch a full review of the company.

Tesco said it had revised its outlook and now expected trading profit for 2014/15 to be in the range of £2.4 billion to £2.5 billion , compared with an analyst forecast of around 3 billion pounds on the company’s website.

The interim dividend will be set at 1.16 pence per share.

"The board's priority is to improve the performance of the group," chairman Richard Broadbent said.

“Our new chief executive, Dave Lewis, will now be joining the business on Monday and will be reviewing every aspect of the group’s operations. This will include consideration of all options that create value for customers and shareholders.”

Tesco said it would also further cut its capital spending by £400 million. For the current financial year it will now be no more than £2.1 billion, as it eases investment in IT and store revamps.

Tesco has been hammered in recent years by fierce competition from both the discount and higher end of the market.

Industry data released on Wednesday showed Tesco’s sales decline had worsened, hurt by the weakest overall market growth in a decade, with sales down 4 per cent year on year in the 12 weeks ended August 17th, with its market share dipping to 28.8 per cent from 30.2 per cent in Britain.

In Ireland, Supervalu is breathing down Tesco's neck in the race to be the Republic's largest retailer. Despite recording a fall in sales over the last quarter there is now less than one per cent separating the two supermarket chains

Reuters