Woolworths has been fined £350,000 by the Financial Services Authority for taking too long to disclose that its profits would be lower than expected.
Woolworths will take the fine as an exceptional charge, which will dent its pre-tax profits in its financial year to 31 January 2009, expected to come in at £28m.
The fine relates to a change in Woolworths' subsidiary Entertainment UK's lucrative contract with Tesco, which had the effect of slashing Woolworths' profits in its financial year 2006/07 by an estimated £8m.
Woolworths became aware of the retrospective discount demanded by the grocery giant on 20 December 2005, but decided not to disclose this "vital information" for 29 days until a Christmas trading update on 18 January 2006.
The FSA said the renegotiation of the contract with Tesco was "inside information" that was "likely to have a significant effect on Woolworths' share price and should therefore have been disclosed to the market as soon as possible".
It is thought to be the first time that a retailer has been fined for breaching stock exchange listing rules and is the largest fine since the technology supplier Pace Micro Technology was fined £450,000 in 2005.
The FSA's director of enforcement, Margaret Cole, said: "Clean, efficient and orderly markets depend on timely and proper disclosure of relevant information. Woolworths' failure to disclose vital information led to a false market in its shares for 29 days. This sort of failure is unacceptable."
She added: "Investors deserve, and the FSA expects, higher standards than Woolworths showed. We will not hesitate to take action where listed companies fail to meet obligations imposed by the rules and principles."
A Woolworths spokeswoman said it accepted the judgment and would not appeal because of the "significant costs, both in financial terms and management time, involved in an appeal".
A Woolworths spokeswoman said the shortfall from losing the Tesco contract was made up by landing other new contracts.Reuse content