Tesco in €317m ‘accounting error’

Tesco slashed its profit forecasts by almost €320m following the discovery of an accounting error, adding to an already tumultuous year for the British retailer.

The company announced yesterday that it had uncovered a huge accounting error of £250m (€317m) in the preparation of interim results due to be released at the beginning of next month.

The revision is the third such profit warning the company has issued to date this year, with the most recent update, prior to yesterday, coming late last month.

The error, Tesco said in a statement, was due to early recognition of part of its income coupled with delayed acknowledgement of costs.

“During its final preparations for the forthcoming interim results, Tesco has identified an overstatement of its expected profit for the half-year, principally due to the accelerated recognition of commercial income and delayed accrual of costs,” it said.

Tesco said its interim results will now be delayed until October 23 as it works to establish the extent of the issues and the degree to which the mistake is likely to impact full-year results.

Four employees have been placed on leave while an investigation takes place. Some media outlets have reported that Tesco UK managing director Chris Bush is among those placed on leave, although Tesco declined to comment on this. It did, however, confirm that multi-channel director Robin Terrell had assumed responsibility for running the UK business.

Tesco chief executive, Dave Lewis said: “We have uncovered a serious issue and have responded accordingly. The chairman and I have acted quickly to establish a comprehensive independent investigation. 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.”

While retaining its status as Ireland’s largest grocery store, Tesco’s business here has come under increasing pressure, particularly as German discount retailers Lidl and Aldi continue to increase their market share.

According to Kantar Worldpanel figures released at the start of the month, Tesco’s market share stood at 25.4% — down from 27% in the same period last year.

An “intensely competitive” market saw sales at Tesco Ireland fall 5.5% in the first quarter of the year, according to its latest financial results.

— Additional reporting Reuters