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Tesco to announce smaller ‘black hole’
UK retailer Tesco is expected to announce this week that the £250 million ‘black hole’ in its accounts – that has led to the suspension of BWS director Dan Jago among several other executives – was overstated by around £25m.
Reports have also claimed that the investigation will reveal a “pattern of inappropriate behaviour” by staff, with a “small group” of employees “striking deals” with suppliers (Photo:Wiki)
The supermarket chain will announce its interim report on Thursday of this week, and according to reports by Sky News at the weekend, this gap is expected to be reduced.
On the back of information provided by an unnamed banking insider, the Sky News website states that the gap will fall “somewhere close to the middle” between £200m and £250m.
A Tesco spokesperson told the drinks business that they are refraining from comment on the speculation.
Tesco announced last month that their half-year profit estimations of £1.1 billion were overestimated by £250m, causing share prices to tumble in what has already been the most difficult year in the supermarket’s history.
The statement was quickly followed by the launch of an investigation and the immediate suspension of four senior executives, before last week a further three were asked to step aside, including Tesco’s head of beer, wine and spirits Dan Jago.
Thursday’s announcement is expected to confirm the names of the suspended executives as so far the company have refused to go into detail. Tesco will also give an update on the progress of their investigation.
The Sunday Times and The Sunday Telegraph both reported at the weekend that this investigation, being carried out by accountants Deloitte and law firm Freshfields, had uncovered a pattern of “inappropriate behaviour” by staff. The Sunday Telegraph cited a source close to the investigation, while The Sunday Times did not cite any sources.
On Friday, CEO Dave Lewis told staff in an internal e-mail seen by Reuters that he expects to be able to give a “clear and accurate indication” of the impact of the accounting mistake when the company reports its results on Thursday.
Whilst Tesco (and perhaps some of its executives) appear to have fallen foul of the regulations, I imagine many in the national retail drinks trade are whispering “there for the grace of God go I…”. We all know there has been a culture amongst major buyers for many, many years now to hammer down prices, squeeze suppliers and pressurize producers into pouring vast sums of money into promotion after promotion (often resulting in those producers dropping into an almost a loss-making position) under the thinly-veiled “threat” that their wines may risk de-listing if they do not comply… Tesco are no different from the rest of the bunch in this respect. The retailers defend their approach and their actions by declaring they are simpy “giving the customer what they want : ie. great value”. But in doing so they have created a culture of bargain seekers amongst consumers where very little loyalty exists (thus negating the money the producers have invested in building their brands, who ironically are often those who aquiesce to damaging their image through aggressive price promotions). Thus many shoppers merely pick-up this week’s half-price deal, before moving on once that particular promotion has run its course. The British supermarket sector really needs to adopt a greater sense of responsibility towards its customers and suppliers alike, and not just focus on the bottom-line and its shareholders. Maybe the highly regulated, Scandinavian State Monopoly system, with its stricter controls and ban on promotions isn’t so bad after all ?