BRITAIN’S financial watchdog has launched a full investigation into the Tesco accounting scandal that has wiped £4 billion (R73bn) from the troubled supermarket chain’s stock market value.
Britain’s biggest grocer announced on September 22 that it had overstated first-half profit by £250 million – effectively its third profit warning in two months.
The news of the Financial Conduct Authority (FCA) investigation sent Tesco’s shares down 3 percent to £1.80 by 11.11am in London yesterday. That was the stock’s lowest level since 2003, with the price down 21 percent since the first accounting mistake was disclosed.
“Tesco will continue to co-operate fully with the FCA and other relevant authorities considering this matter,” the company said.
The accounting error highlighted the scale of the challenge facing new chief executive Dave Lewis, who joined the business on September 1, three days after a previous profit warning on August 29.
“Such an investigation [by the FCA] can only be another distraction for… Lewis and represents another black mark on the board,” Clive Black at Shore Capital said.
Lewis is fighting fires on multiple fronts. Industry data show that Tesco is the worst performer of Britain’s so-called Big Four grocers, which also include Walmart’s Asda, Sainsbury’s and Morrisons, with its market share dropping to 28.8 percent at September 23 from 30.2 percent a year earlier.
Tesco now has a market capitalisation of £14.6bn, against almost £19bn before the accounting scandal emerged. – Reuters