Tesco in turmoil over inaccurate results

Supermarket giant Tesco, one of the biggest wine retailers in the world, has suspended four executives over a £250million overestimation of profits.

Tesco shares briefly fell to an 11-year low as traders reacted to the news (Photo:Wiki)

The retailer admitted on Monday morning that its first-half profits announced last month were overstated by £250m, and have called in auditors to go through the company’s accounts.

The news sent stocks in Tesco plc to briefly plummet by 11.3% to an 11-year low of 203.5p as traders continue to react to the announcement.

They have since stabilised at 212.5p – a dive of 7.5%.

Tesco’s first-half results were already accompanied by the company’s largest ever profit warning amid a turbulent market that continues to be overhauled by budget stores taking larger market shares in the UK.

At the time, it said trading profit for the six months to August 23 was expected to be around £1.1bn.

This was overstated “principally due to the accelerated recognition of commercial income and delayed accrual of costs” according to the company.

In other words, this means that predicted incomes further in the future were included prematurely, while costs that should have been accounted for were delayed for future reports.

“We have uncovered a serious issue and responded accordingly,” said Tesco chief executive Dave Lewis.

Mr Lewis, who took over at Tesco on 1 September, said the issue was “something completely out of the ordinary” and his priority was to carry out “a full and frank investigation”.

Analysts have widely criticised Tesco following the announcement.

AvaTrade chief market analyst Naeem Aslam told the BBC that Tesco had been “extremely slow” to respond to market changes. “Today’s news is another disaster for the company,” he said.