Tesco released its 2014/2015 Interim Financial Results this week, revealing that the company had incorrectly estimated the extent of its profit overstatement error. Rather than the £250 million number which it had quoted earlier this year (roughly $400.85 million), the interim results show that Tesco had overstated its profits by £263 million (roughly $421.70 million).
Investors did not react favorably to this news, trading down the price of Tesco's stock 6.8852%, or $12.60/share, to $170.44/share as of 8:25am PT on October 23, 2015. Despite the day's losses however, CEO Dave Lewis remained optimistic about his long term outlook for the retail giant.
“Our business is operating in challenging times,” Lewis shared in Tesco's Interim Report. “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.”
If Tesco is to regain its former enviable position in the UK retail market, it will likely have to do so without longtime Chairman Sir Richard Broadbent, who announced that he will be stepping down in the coming months once Tesco has finished the transition to its new management team.
“The issues that have come to light over recent weeks are a matter of profound regret...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,” he said. “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.”
As of today, Tesco has not released any word on potential candidates for the Chairmanship position once Broadbent does step down.
Stay tuned to DeliMarket TV for future updates on Tesco as it works to reestablish itself in the UK's retail industry.