Shares in Tesco plunged in early trading after the supermarket made a shocking admission that its profit forecast was inflated by £250 million as it vowed to hold a full investigation, including former boss Phil Clarke.
New chief executive Dave Lewis, who has been in the job only since the start of month, said the board had asked law firm Freshfields and accountancy firm Deloitte to conduct an independent review into the accounting irregularities, and had referred the matter to the Financial Conduct Authority. PwC has been Tesco’s auditor since 1983.
The investigation will involve the questioning of past and present senior executives, including Clarke, who was ousted in July. Lewis said he was unable to say how deep the problems lay, adding: “It will be the fullest investigation possible, so we will talk to anyone with a point of view on the situation.”
As Tesco shares — which have lost nearly 40 per cent in the past 12 months — plunged 20.55p to 209.07p, under-fire chairman Sir Richard Broadbent said he would remain in place and that any decision to resign would be in the hands of shareholders.
“Things are always unnoticed until they are noticed,” he said. “I think the most important thing right now is to deal with the investigation in front of us.”
He said he was looking at all options, including bringing new chief finance officer Alan Stewart in before his December start date — although Stewart’s current employer, M&S, is unlikely to let him leave early — and would investigate possible bonus clawbacks such as former chief finance officer Laurie McIlwee’s £1 million golden goodbye.
Tesco has suspended four executives, which it refused to name, although it said UK managing director Chris Bush had been temporarily replaced by multi-channel director Robin Terrell.
Lewis said issues were raised with him on Friday afternoon by a senior employee about the UK commercial division, which led to an internal investigation over the weekend, before it was decided an independent review should be conducted.
Lewis explained: “The revenues due to us from suppliers … has been reported in the wrong time period.”
He added: “It’s about the recognition of the money received versus when the transaction took place.”
He added that he had never seen anything like it during his 27 years at Unilever.
However, Freddie George, retail analyst at Cantor Fitzgerald, said he had warned Tesco last year of potential irregularities over its falling sales.Reuse content