Tesco Suspends Four Executives in $408 Million Profit Overstatement Controversy

Tesco Suspends Four Executives in $408 Million Profit Overstatement Controversy

CHESHUNT, ENGLAND – Tesco has suspended four executives after the retailer overstated its half-year profit guidance by £250 million, which is more than $408 million U.S.

“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,” said Dave Lewis, Tesco CEO.

According to a release from the company, Tesco identified an overstatement of its expected profit for the half-year while preparing for its upcoming interim results.  From its preliminary investigations, the Board believes that the guidance issued last month for the Group profits for the six months to August 23, 2014 was overstated by about £250m through an error that increased sales numbers and decreased expenses.

BBC News reports that Lewis said a number of people have been suspended from duty to facilitate the fullest and deepest investigation possible, but emphasized that this is not disciplinary or an admission of guilt.

The Board has asked accounting firm Deloitte to undertake an independent and comprehensive review of the issues while working with Freshfields, the Group’s external legal advisers.

As of today at 1.30 PM Eastern Time, Tesco stock in the U.S. was down $0.03, or 0.15%.  In the UK market, stock fell £23.70, or 10.32%.

This marks the latest difficulty for Tesco after the company’s CEO stepped down in July.

More information will be released with the company’s interim results on October 23, 2014.  Stay tuned to AndNowUKnow for the latest updates on this story.