Tesco issues profit warning as four executives are suspended

Troubled Tesco announced this morning that its half-year profits may have been over-stated by as much as £250 million.

Dave Lewis: announces investigation into 'serious issue ' at Tesco
Dave Lewis: announces investigation into 'serious issue ' at Tesco

The grocery giant has brought in external advice in the form of financial consultants Deloitte and the legal firm Freshfields to steer it through the current crisis.

Interim results for Tesco have now been pushed back from 1 October until 24 October.

Tesco’s profit warning, announced this morning, stunned the market according to analysts at Shore Capital Stockbrokers.

The firm said the announcement was "not the stuff of a well-operated FTSE-100 organisation" and that it did not know the "full extent, cause, timing and outcomes" of the current problems at Tesco.

Shore Capital said there was no suggestion that newly installed chief executive Dave Lewis, in post for less than  a month, was at fault, but that the announcement might raise questions about the position of Richard Broadbent as chairman.

Commenting on the results, 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."

Tesco said four senior executives had been suspended from duty while the investigation into what went wrong is carried out.

Shore Capital argued that the Tesco board was too heavily weighted in favour of executives and non-executive directors.

Clive Black, head of research at the firm, said: "These are serious times for Tesco and its shareholders. We are flabbergasted by this development... we expect the market to respond in a penal manner on the Tesco’s shares upon opening, we’ll monitor with interest how the dust settles."

Earlier this month, Tesco streamlined its marketing structure under newly appointed customer chief Jill Easterbrook, a restructure that will result in a number of redundancies.

Sharry Crammond, group marketing strategy and brand director, becomes head of brand and position, while Neil Adams, who is head of marketing, event and operations, will take charge of the retailer’s marketing, planning and operations team.

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