LONDON, Oct 23 — The chairman of Britain's biggest retailer Tesco will resign after the supermarket group was found to have overstated profits by £263 million (RM1.38b), it announced today.
“The board's immediate focus must be on ensuring that we complete the transition to a new management team and that new and far-reaching business plans are put in place quickly,” chairman Richard Broadbent said in a statement that also revealed Tesco's net profit had slumped to just £6 million in its first half from £820 million one year earlier.
Tesco scrapped its full-year profit outlook and reported a bigger than expected hole in its accounts today after finding an erroneous practice of booking profit had gone back further than expected.
Tesco, which has lost 20 per cent of its market value this month after three profit warnings and the accounting mis-statement, scrapped the outlook as its second-quarter underlying domestic sales fell sharply, down 5.5 per cent.
Tesco, a once unstoppable juggernaut, has in recent years been battling fierce competition and rapid changes in the way Britons shop. The 5.5 per cent fall in organic British sales compared with a 3.8 per cent drop in the first quarter, which was described at the time as the worst performance in 40 years.
To compound the trading pressures on the group, it said last month it had discovered an overstatement its first-half profit forecast of £250 million due to the way it booked payments from deals with food suppliers.
After finding that the accounting practice had gone back further than expected, it said today the overall impact had now risen to £263 million. The investigation is ongoing.
“The commercial income overstatement will affect our second half results,” the company said. “There are a number of uncertainties which limit visibility of future performance. For these reasons we are not providing full-year profit guidance.”
The group said it was reviewing all opportunities to generate value and create financial headroom following speculation that it could look to sell assets to raise cash.
Tesco said group trading profit of £937 million for the 26 weeks to August 23 was down 41 per cent at actual exchange rates. — Agencies
