Tesco suspends executives following accounting error
Sept. 22, 2014
by Eric Schroeder
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HERTFORDSHIRE, England — Tesco, the United Kingdom’s largest retailer and one of the world’s largest international retailers, has suspended four senior executives and launched an investigation of its financials after admitting that its half-year profit was overstated by £250 million ($407 million).
The accounting irregularity led Tesco to issue a trading update and profit warning on Sept. 22, a move that sent the company’s share price down nearly 9 percent in early trading.
Tesco said it identified an overstatement of its expected profit during its final preparations for forthcoming interim results, citing “the accelerated recognition of commercial income and delayed accrual of costs.” The company said some of the impact includes in-year timing differences, and work is under way to identify the extent of the issues and what impact they may have on the full year.
The guidance initially was issued on Aug. 29 for the six months ended Aug. 23. At that time, Tesco said trading profit for the six months ended Aug. 23 was expected to be about £1.1 billion, while trading profit for 2014-15 is expected to be in the range of £2.4 billion to £2.5 billion. The company expects to provide a further update on Oct. 23.
“We have uncovered a serious issue and have responded accordingly,” said Dave Lewis, who joined Tesco as CEO on Sept. 1. “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.”
According to news reports, the four executives that have been put on leave are Chris Bush, UK managing director; Carl Rogberg, UK finance director; John Scouler, UK food commercial director; and Matt Simister, food sourcing director.