STRUGGLING GROCER Tesco has announced a 92 per cent profits plunge and warned of more pain to come after the discovery of a worse-than-expected £263m hole in its accounts.
Britain’s biggest supermarket also revealed sales – already falling at their steepest level in four decades – had deteriorated even further.
Pre-tax profits for the six months to August 23 fell to £112m from £1.39bn in the same period last year, hit by the weak sales performance plus a series of one-off charges including the effect of the accounting scandal revealed last month.
Shares tumbled by as much as 9 per cent, wiping more than £1bn off the group’s value, as Tesco warned the effects of the blunder were worse than the £250m pencilled in when it was revealed last month and more costs could result.
A probe into the scandal –which involved rebates from suppliers being moved around to different periods on the company’s balance sheet – found that it had been going on for years and at least as far back as the 2012/13 period.
Tesco has asked eight executives to step aside in the wake of the probe while chairman Sir Richard Broadbent today said he would step down to show that someone was “carrying the can” for the errors – which were “a matter of profound regret”.
New chief executive Dave Lewis tried to draw a line under the episode as he pledged to restore the company’s competitive edge and again make it “the best supermarket for customers” amid a full-scale review of the business.
But Tesco has now had to re-write its rules on dealing with suppliers in light of the mistakes and said this would have an impact on its second-half performance. It is also facing an investigation by the Financial Conduct Authority which it warned could result in “significant” fines.
Meanwhile the business has frozen pay-offs of £1.14m due to be paid next year to departed chief executive Philip Clarke and £970,000 for former finance director Laurie McIlwee.
Tesco’s like-for-like sales performance for the second quarter fell by 5.4 per cent, worse than the 3.7 per cent in the first quarter.