The Financial Times this morning reports that Tesco chairman Sir Richard Broadbent plans to step down at a still-to-be determined date. He said earlier today that the accounting scandal that has roiled the company is “a matter of profound regret," and that he will "prepare the ground to ensure an orderly process for my own succession."
Meanwhile, the New York Times reports that Tesco said that "it had overstated profits by £263 million, or about $423 million, slightly more the company had revealed last month. The company, hobbled by eroding sales and the profit scandal, also revealed for the first time that the accounting irregularities stretched back further than it had first disclosed. It said that £118 million of the shortfall related to the first half of this year, with another £145 million linked to the past two years."
And Reuters writes that Lewis said "he could no longer provide a full-year profit forecast because he did not know the scale of Tesco's problems or how much it would cost to rebuild the world's third largest grocer."
The Times confirms that the discrepancy in Tesco's books comes from booking promotional income from manufacturers too early while pushing costs out too far into the future as a way of making the company's financial situation look better than it was.
FT reports that "Dave Lewis, Tesco’s new chief executive, would not comment on whether the overstatement had been the result of error or deliberate action. He said, however, there was 'evidence that no one made any financial gain from the situation.' He added that no bonuses had been paid to executives in the three years over which the mis-statement had taken place.
"Nevertheless, Mr Lewis said that severance payments – together worth millions of pounds – to Philip Clarke, ousted as chief executive in July, and Laurie McIlwee, who resigned as finance director in April, were being withheld until the conclusion of an investigation into the matter by the Financial Conduct Authority."
Eight senior managers have been suspended from their roles pending the completion of the investigation.
Meanwhile, the New York Times reports that Tesco said that "it had overstated profits by £263 million, or about $423 million, slightly more the company had revealed last month. The company, hobbled by eroding sales and the profit scandal, also revealed for the first time that the accounting irregularities stretched back further than it had first disclosed. It said that £118 million of the shortfall related to the first half of this year, with another £145 million linked to the past two years."
And Reuters writes that Lewis said "he could no longer provide a full-year profit forecast because he did not know the scale of Tesco's problems or how much it would cost to rebuild the world's third largest grocer."
The Times confirms that the discrepancy in Tesco's books comes from booking promotional income from manufacturers too early while pushing costs out too far into the future as a way of making the company's financial situation look better than it was.
FT reports that "Dave Lewis, Tesco’s new chief executive, would not comment on whether the overstatement had been the result of error or deliberate action. He said, however, there was 'evidence that no one made any financial gain from the situation.' He added that no bonuses had been paid to executives in the three years over which the mis-statement had taken place.
"Nevertheless, Mr Lewis said that severance payments – together worth millions of pounds – to Philip Clarke, ousted as chief executive in July, and Laurie McIlwee, who resigned as finance director in April, were being withheld until the conclusion of an investigation into the matter by the Financial Conduct Authority."
Eight senior managers have been suspended from their roles pending the completion of the investigation.
- KC's View:
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The general feeling from most of an analysis I've read seems to be that while Tesco seems to acknowledging its problems, there still seems to be no real plan for how to proceed in the future. I'm not sure if that is entirely fair - after all, it is hard to plant new stuff until you've cleared away the old, dying foliage. (At least, I think that's the case. I know nothing about gardening or agriculture. But this seems like a metaphor that would make sense…)
Still, the folks at Tesco can't fix these problems too quickly. This seems like such an utter failure of management and a collapse of any sort of ethical culture … and it is refreshing to see that departed executives such as Clarke and McIlwee forced to take some level of accountability. I'm not sure if Tesco has any sort of stick when it comes to former CEO Sir Terry Leahy, but it certainly seems to me that he ought to feel some of the pain as well, because he helped to build this house of cards.
