Tesco fesses up to the full extent of its accounting irregularities
Tesco has conceded that the extent of its accounting irregularities are greater than first feared having overstated its profits by £263m for at least two years, £13m more than first thought.
Britain’s biggest supermarket chain has posted a dismal performance in its latest trading update with profits down 40 per cent and UK like-for-like sales sagging 4.6 per cent.
The tide of woe extended to international markets too, particularly Asia where profits slid 17 per cent to just £260m, fuelling speculation that the division may be sold off to raise much needed capital.
In a further blow the firm has also scrapped its profits outlook after warning that full year profitability could be ‘further impacted’. In a statement Tesco said: “As such, there are a number of uncertainties which limit visibility of future performance. We will do the right thing for customers - and therefore the business - despite these uncertainties. For these reasons we are not providing full year profit guidance.”
The scandal saw executives book earnings early and delay costs to massage its figures, a practice which became ever more extreme as more and more revenue was brought forward to keep the balance sheet rosy.
Not all was doom and gloom in the red and blue aisles however as Tesco did at least manage to avoid having to restate its historic financial results as current figures were not ‘material in the prior periods’.
The news is expected to edge Tesco shares higher in early trading as investors welcome accountant firm Deloitte’s failure to unearth any more skeleton’s at the back of Tesco’s cupboards.
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Tesco also announced that it would withhold payoffs to former CEO Phil Clarke and finance director Laurie McIlwee pending an investigation by the Financial Conduct Authority. Tesco's chairman, Sir Richard Broadbent, will also step down soon.
Commenting on the latest machinations Phil Dorrell, director of Retail Remedy, said: "Sir Richard Broadbent's decision to fall on his sword was, on balance, the right one. Unlike Dave Lewis, he has been there throughout.
"That the overstatement of profits is slightly higher than originally thought is another turn of the knife.
"The fact that Tesco has chosen not to provide full year profit guidance underlines the extent of its problems. For Tesco, it really is do-or-die time. If there's one positive, it's that Tesco is still a formidable player in the grocery market and is teak tough. Despite its current crisis, it is still in the game."