Tesco chairman to step down as profit falls by 92%
Tesco has reported a sharp drop in its half-year sales and profits as its chairman Sir Richard Broadbent said he will be stepping down.
In the 26 weeks ending 23 August, statutory pre-tax profit fell by 91.9% to £112 million. Group trading profit dropped by 41% £937 million, which the supermarket attributed to challenges in its UK business.
Meanwhile, total sales declined by 4.4% to £34 billion in the period.
Last month, Tesco revealed that it had overstated its profits for the first half by £250 million and asked accountancy firm Deloitte to undertake a review of the issues. Today the supermarket increased this figure to £263 million of which £118 million relates to first half trading profit, £70 million to the 2013-2014 financial year, and £75 million to pre-2013-2014.
Tesco chairman Sir Richard Broadbent said: "The issues that have come to light over recent weeks are a matter of profound regret. 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 chief financial officer will move rapidly and effectively in this respect.”
Broadbent also said that he is preparing to step down.
In the UK, like-for-like sales were down 4.6% as trade was impacted by strong competition across the grocery market, headwinds from price cuts and fewer untargeted promotions. Total sales declined by 2.6% to £23.6 billion.
Total UK online sales grew by 11% and there was like-for-like sales growth of 0.8% in UK convenience stores.
In Asia, total sales edged down 0.5% at constant rates and by 8.4% at actual rates, held back by difficult market conditions across the region.
In Europe, total sales including petrol declined by 1.8% at constant rates and by 9.3% at actual rates although the supermarket saw positive like-for-like sales growth in the Czech Republic, Hungary and Turkey.
Chief executive Dave Lewis, who joined the supermarket last month, said: "Our business is operating in challenging times. 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.”
Tesco said the commercial income overstatement would affect its second half results as it revisits its plans with new management. Therefore, it did not provide profit guidance for the full year.
Lewis added: “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."
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