Watchdog to probe Tesco accounting scandal

The financial watchdog in Britain has launched a full probe into the Tesco accounting scandal, which has wiped £4bn (€5.1bn) off the troubled grocer’s stock market value.

“Tesco will continue to co-operate fully with the Financial Conduct Authority and other relevant authorities considering this matter,” the company said yesterday.

Tesco — the UK’s biggest grocer and the world’s third biggest retailer — announced last week that it had overstated first-half profit by £250m — effectively its third profit warning in two months.

It suspended four senior executives and launched its own investigation, calling in forensic accountants and lawyers.

The profit over-statement, which related to the mis-booking of rebate payments from suppliers, added to Tesco’s existing woes.

Industry data shows that Tesco is the worst performer of Britain’s so-called “big four” grocers, which also includes Sainsbury’s, Wal-Mart’s Asda, and Morrisons, with its market share falling to 28.8% from 30.2% at the same time last year.

The company said in its statement the Financial Conduct Authority’s investigation will be in addition to the independent review already under way by accountants Deloitte.

Further scrutiny of the grocer could also come from British lawmakers. The chairman of a parliamentary committee said, last week, he might want to grill Tesco’s top executives about the accounting scandal.

The news of the Financial Conduct Authority investigation sent Tesco’s shares down 3% in early trading yesterday, to £1.80, its lowest level since 2003.

The accounting error highlighted the scale of the challenge facing new CEO, Dave Lewis, who joined the 95-year-old business on September 1, three days after a previous profit warning.

“Such an investigation [by the FCA] can only be another distraction for Dave Lewis and represents another black mark on the board,” said Shore Capital analyst Clive Black.

Separately, yesterday, rival supermarket Sainsbury’s cut its full-year sales forecast after trading fell sharply in the second quarter.