Shares in Tesco took a battering after new boss Dave Lewis refused to reveal his plans to tackle the most devastating crisis in the supermarket’s history and return it to growth.
Analysts were spooked as the grocer scrapped its previous £2 billion profit guidance for the full year due to the huge hurdles facing the group, sending shares down 5 per cent.
Lewis revealed that chairman Sir Richard Broadbent would be standing down following the completion of an investigation by Deloitte and Freshfields which found Tesco’s accounts had been artificially boosted by £263 million. The overstatements are bigger than previously estimated and stretch back for more than three years.
Lewis said the company must restore competitiveness in the UK, protect and strengthen its balance sheet and “begin the long journey of rebuilding trust and transparency in the business and the brand.”
He added: “As of today, we draw a line under the accounting issue. We dealt with it completely and then we start again in terms of looking at the business going forward.”
But the chief executive was silent over how he intends to win back customers and bolster the balance sheet, leading analysts to speculate over whether he will launch an all-out price war or look to sell parts of the business, possibly Blinkbox or its Asian companies.
Bruno Monteyne, retail analyst at Bernstein, said the announcement was “light on core details, no message of what units are for sale, no names for the ‘new management team’ and a reference to a ‘number of uncertainties’ going forward that mean no guidance for the full year, which were not explained. We feel he could have started bolder.”
The results for the six months to August 23 saw sales down 4.4 per cent to £34 billion, with the UK business suffering a 4.6 per cent like-for-like fall. The latest quarter saw more customers deserting the supermarket, with sales down 5.5 per cent over the three months.
Pre-tax profits for the period collapsed 92 per cent to £112 million, with UK profits falling 60 per cent to £499 million.
Lewis also revealed that investigators found no evidence of overseas issues, with 18,000 invoices reviewed and 6.3 million documents captured.
Tesco confirmed that former Tesco chief executive Phil Clarke will not receive his potential £10 million pay-off until the Financial Conduct Authority’s investigation is completed.
Former finance director Laurie McIlwee’s £1 million severance is also being withheld.Reuse content