Tesco chair to step down as net income plummets below estimates
Cheshunt, U.K. –- Sir Richard Broadbent, chairman of Tesco PLC, will step down in the wake of a 99% drop in net income for the first half of fiscal 2014. Tesco reported first half profits of $9.6 million, about $333 million less than previous estimates.
An investigation conducted by Deloitte has concluded that the vast overestimate of first half profits resulted from some income being booked too early and some costs not being recognized, although it is not yet clear whether this was accidental or deliberate.
Dave Lewis, a former Unilever executive who took over as Tesco CEO in Aug. 2014, has been shuffling the management team since assuming his role as CEO and was tipped off about the accounting error in September, when the Deloitte investigation was launched. Alan Stewart joined the company as CFO on Sept. 22.
“Our business is operating in challenging times,” said Lewis. “Trading conditions are tough and our underlying profitability is under pressure. We do however face these challenges from a position of market strength and I have been heartened by the team’s welcome and their determination to stay focused on doing the very best for our customers. Whilst my review of the whole business continues, three immediate priorities are clear: to recover our competitiveness in the UK, to protect and strengthen our balance sheet and to begin the long journey back to building trust and transparency into our business and brand.”
In addition to Broadbent resigning, eight other executives have been suspended. Broadbent said he will officially step down once the underlying cause of the profit overstatement has been identified and a transition program is in place.
“The issues that have come to light over recent weeks are a matter of profound regret,” said Broadbent. “We have acted quickly to clarify the financial performance of the company. A new management team is in place to address the root causes of the mis-statement and to develop and implement the actions that will build the company’s future. I am confident that the new chief executive and CFO will move rapidly and effectively in this respect.
“Once this transition is complete and business plans are in place, it will mark the beginning of a new phase for the company and I will begin now to prepare the ground to ensure an orderly process for my own succession at that time. My decision reflects the important principle of accountability on behalf of the board and will support the company to draw a line under the past as it enters the next phase of its development.”