British retail giant Tesco has announced that its operating profit for the first six months (until 23 August 2014 will be much lower than expected. The British market leader will investigate how the reporting system failed to retrieve the correct numbers.
New CEO has false start
Tesco had announced on 29 August that its 6-month profit for its current fiscal year would reach 1.1 billion pound sterling (1.4 billion euro), but the company announced this morning that the forecast was way too high, by some 250 million pounds (320 million euro).
It was a false start for Tesco's new CEO, David Lewis, as the company missed its profit forecast by 23 %. "We have uncovered a serious issue and have responded accordingly. The Chairman and I have acted quickly to establish a comprehensive independent investigation", the CEO stated in a press release.
Tesco has appointed Deloitte's accountants to research its reporting system, instead of its regular team of external pwc overseers. It will also request the help from Freshfields, its team of external legal advisers.
4 directors suspended
Lewis emphasized that "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 company has already suspended 4 senior managers from active duty. It seems Chris Bush, Tesco UK's managing director, is one of them.
Lewis has to do everything he can to appease the shareholders as they are unconvinced by Tesco's attempts at integrity and transparency. Tesco's share has been hit hard after the news broke.
Tesco will release new numbers on 23 October and it will take the negatively altered numbers into consideration.