LONDON (AFP) – Britain’s biggest retailer, supermarket group Tesco, has launched an investigation after revealing that it had overstated its half-year profit forecast by £250 million ($409 million, 318 million euros), it said on Monday.
“We have uncovered a serious issue and have responded accordingly,” new chief executive Dave Lewis said in a statement on behalf of Tesco, which is the world’s third-biggest supermarket group after France’s Carrefour and global leader, US retailer Wal-Mart.
“The chairman and I have acted quickly to establish a comprehensive independent investigation,” said Lewis, who took the helm at the start of September.
“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.”
Following preliminary investigations into its UK food business, Tesco said it believes that guidance regarding group profits for the six months to August 23 “was overstated by an estimated £250 million”.
A general view of the exterior of the Kensington store of United Kingdom based supermarket giant Tesco. Tesco has launched an investigation after revealing that it had overstated its half-year profit forecast by £250 million – EPA
Tesco will publish its interim earnings on October 23, three weeks later than had been planned.
The announcement is a fresh blow for Tesco, which in August issued a profits warning and slashed its shareholder dividend by 75 per cent, blaming challenging trade and high investment costs.
Tesco, which is facing intense competition in Britain from German-owned discount retailers, had announced in July that outsider and Unilever executive Lewis would replace Philip Clarke.
Lewis’ predecessor had shocked financial markets at the start of 2012 when he oversaw the supermarket’s first profits warning in 20 years.
That sparked a £1.0-billion turnaround plan to refresh its supermarket stores, but the group revealed in April that annual profits fell for the second year in a row.
Tesco has struggled in recent years in Britain, as recession-weary shoppers have turned to German-owned discount retailers Aldi and Lidl.
Discount chains boomed during the downturn as consumers tightened their belts to save cash, and remain popular despite the economy’s strong recovery this year.
Tesco’s profits have also been weighed down also by fierce competition from its traditional supermarket rivals comprising Wal-Mart division Asda, Sainsbury’s and Morrisons.
Meanwhile over the past two years, Tesco decided to close its failed US division Fresh & Easy and to exit from Japan.