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Tesco Asks More Executives To Quit Amid Alleged Book-Cooking Fallout

More Tesco Bosses Are Leaving Over £250m Book-Cooking Shambles
Asa Bennett
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A 'Sorry' logo sits on a customer notice outside a Tesco Extra supermarket store, operated by Tesco Plc, in the Old Kent Road district of London, U.K., on Thursday, Sept. 25, 2014. Tesco may be reduced by more than one credit level, taking it into speculative grade, if the findings of a probe into the accounting errors prompt the ratings company to lower its assessment of Tesco's management and governance to 'weak,' Standard & Poor's said yesterday. Photographer: Matthew Lloyd/Bloomberg via Gett
Bloomberg via Getty Images

Tesco has asked another three non-executive directors to leave the retailer, bringing the total number of executives who have had to leave to eight, after having to admit that its half-year profit was overstated by £250 million.

The troubled retailer confirmed the news in a statement: "We have asked three employees to step aside to facilitate the investigation into the potential overstatement of profits in UK food.

It added: "We will provide an update on the investigation with our interim results on 23 October."

The supermarket shocked investors when it revealed its awry profit guidance, coming soon after it had to issue its third profit warning in two years in its continued struggle to compete with low-cost rivals.

Dave Lewis, Tesco's new chief executive, has stressed that any move taken by the supermarket against executives so far is not "disciplinary or an admission of guilt".

The Financial Conduct Authority watchdog has launched its own investigation over Tesco's profit guidance, while the supermarket is carrying out an internal investigation led by the law firm Freshfields and the accountancy firm Deloitte.

MPs have also signalled that they may be keen to grill executives over the supermarket's "stratospheric" error in its profit guidance.

Story continues below...

Six Reasons Tesco's Dominance May Be Finished
Tesco can't shrug off its poor performance(01 of06)
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Clarke blamed the dip in sales on cutting prices, moving away from vouchers and the disruption from refurbishing a large number of stores.However, Bernstein Research's Bruno Monteyne estimates that if you took out such costs, their like-for-like sales would still have dipped by 2%.
Tesco is trying too hard to appeal to everyone (02 of06)
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Discount retailers like Asda specialise in offering good deals, while fancy supermarkets like Waitrose are without equal at providing luxury. So Tesco is trying to be a mix of everything, other customers are lured away by more specialised rivals.
Others are doing what Tesco is trying, but better(03 of06)
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Tesco "has been increasing prices way too fast over the last few years to keep up earnings growth," Monteyne points out.As a result, compared to discount retailers like Asda, Tesco is at least 4% more expensive for shoppers.
1 million fewer customers are visiting a week(04 of06)
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The proof that Tesco is having some issues comes in the footfall, as the chain seems to have lost more than 1 million customer visits a week, worth £25 million in sales.
Tesco has never done this badly (05 of06)
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Clarke, who has worked for 40 years at Tesco, admitted: “I have never seen a quarter’s like-for-like sales like this before, that I can remember."Monteyne told Radio 5 Live the results were "the worst in their history."
Even Tesco's boss isn't confident (06 of06)
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“I see every day the improvements that are coming in the business, but I’m not making any promises about sales improving in the next few quarters," Clarke warned today. Meanwhile, other analysts like Julie Palmer at Begbies Traynor think Clarke "doesn't seem to have a clear turnaround strategy". He'll have to work hard to prove them wrong.

Adrian Bailey, chairman of Parliament's Business, Innovation and Skills Committee, told BBC Radio 5 Live it was "unbelievable" that a company of Tesco's size could get into such a mess.

Tesco was also forced to admit that its former finance director Laurie McIlwee had not been into the office since leaving in April.

The supermarket said that a group of "senior finance personnel" had been in charge, reporting to chief executives Philip Clark - and then Dave Lewis - in McIlwee's place.

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