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Tesco adjusts profit warning

September 22, 2014

Britain's largest retailer Tesco has suffered another blow to its reputation, revealing a massive accounting error that made an already unsavory profit warning even more bitter.


Supermarket group Tesco admitted Monday that an accounting error had led it to overstate its profit forecast for the first half of 2014 by 250 million pounds ($409 million, 317.8 million euros).

Company shares - already languishing at decade lows - plummeted 11 percent on the news.

"We have uncovered a serious issue and have responded accordingly," Tesco's new Chief Executive Dave Lewis said. "The chairman and I have acted quickly to establish a comprehensive independent investigation."

The company had already issued a profit warning on Aug. 29, when it said trading profit from the first six months of the year, which ended on Aug. 23, would total around 1.1 billion pounds. With that figure too high, Tesco has now pushed back publication of its interim earnings until Oct. 23 - three weeks later than initially planned.

Four employees have also reportedly gone on leave while the company carries out its investigation, Reuters cited an unnamed source as saying.

Full transparency promised

That statement marked the first time markets had heard from Lewis, who succeeded Phil Clarke on Sept. 1. Under Clarke, Tesco issued three profit warnings in two and a half years as buyers migrated to German-owned discount supermarkets Aldi and Lidl.

The first warning came in early 2012 and stunned investors, who had grown accustomed to two decades of uninterrupted growth.

"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," Lewis said.

cjc/hg (Reuters, AFP)

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