Tesco shares at 11-year low after €300m profits blunder
Supermarket giant Tesco suffered fresh humiliation today after a shock admission that it overstated its profits guidance by over €300m.
The UK company told investors today there had been some accounting mistakes in its financial forecasts from August and it was anticipating to make about £250m (€300m) less than expected for the first half of the year.
The world's second-biggest retailer has now downgraded its expected profits after admitting to the "overstatement" in its finances.
It was the company's third profit warning so far for 2014 after it spoke late last month about "challenging trading conditions".
The supermarket has asked Deloitte to undertake an "independent and comprehensive" review of the issues, which involved the accelerated recognition of commercial income and delayed accrual of costs. Deloitte will work alongside external legal advisers Freshfields.
The investigation relates to Tesco's latest profits warning at the end of August, when it said half-year trading profits would be in the region of stg£1.1 bn (€1.4bn)
New chief executive Dave Lewis, who started in the role on September 1, said: "We have uncovered a serious issue and have responded accordingly."
The errors emerged during the company's preparations for half-year results, which will now be announced on October 23 rather than October 1.
Mr Lewis, a former Unilever executive, added: "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."
The supermarket refused to confirm reports that UK managing director Chris Bush is among the four members of staff suspended while the accountancy firm Deloitte carries out an "independent and comprehensive" review.
The investigation, which centres on when Tesco reports the income it receives from suppliers, was brought to the attention of Tesco's general counsel by a whistleblower on Friday.