TESCO SHARES DROP TO 11 YEAR LOW WHILE DIRECTORS SUSPENDED
Sept 22 2014, 3.35pm GMT
Tesco has called in Deloitte to review its accounts after it was revealed that the retail giant overstated first-half profits by £250m. Shares then plummeted down by 11.3 per cent on Monday trading, to an 11 year low of 203.5 pence. Prices later rallied to 210p, down 8.2 per cent, but have since struggled to stay flat, dropping to 202.50p today in a volatile race to steady.
Having struggled with upper management and Board appointments all year, Tesco have seen shares tumble since July. Now with this latest disaster of financial accounting, Tesco's new chief executive Dave Lewis has said that four directors have been suspended and Robin Terrell had stepped up as leader of the UK team.
According to the Financial Times, “Tesco said the overstatement related to a trading update at the end of August, when it unveiled its biggest profit warning, cut its dividend and slashed planned investment. At the time, it said trading profit – a measure of operating profit that excludes property gains and losses – for the six months to August 23 was expected to be in the region of £1.1bn.”
The problem has come from lower sales and Tesco not being able to fulfil the sales targets set by suppliers who offer substantial discounts if they are reached. Tesco has not sold sufficient and therefore suppliers have taken their discounts elsewhere but Tesco are still using past estimates in their projections and accounts.
Now the plan is to obtain a comprehensive review of accounts, choosing Deloitte over PwC, Tesco’s normal auditors.
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