22nd September 2014
Shares in Tesco have nosedived as the business reveals it had overestimated its half-year profits by some £250m.
The troubled group has launched an internal review into the matter and according to reports a number of employees have already been suspended. By 09:20 stock in Tesco, the UK’s largest supermarket chain, was down by 8% or 18.5p to 211.1p.
In a statement, the firm said that during its final preparations for the forthcoming interim results, it has identified an overstatement of its expected profit “principally due to the accelerated recognition of commercial income and delayed accrual of costs”.
It continued: “On the basis of preliminary investigations in to the UK food business, the board believes that the guidance issued on 29 August 2014 for the Group profits for the six months to 23 August 2014 was overstated by an estimated £250m. Some of this impact includes in-year timing differences. Work is ongoing to establish the extent of these issues and what impact they will have on the full year.”
Accountancy group Deloitte has been called to undertake an independent review of the issue.
Dave Lewis, group chief executive officer said: “We have uncovered a serious issue and have responded accordingly. The Chairman and I have acted quickly to establish a comprehensive independent investigation. The Board, my colleagues, our customers and I expect Tesco to operate with integrity and transparency and we will take decisive action as the results of the investigation become clear.”
The business will provide a further update at its interim results, which have now been pushed back from the 1 to 23 October 2014.
Recent times have seen the UK’s supermarket sector in general struggle with their market share, as tougher competition has emerged from challengers Lidl and Aldi, the so-called “hard discounters”.
In August, the group’s shares fell to an 11-year low after it issued a profit warning where it slashed its full year expectation from £2.8bn to £2.4bn. Tesco’s former chief Philip Clarke stepped down from his role in July after his attempts to reinvigorate the group broke down.