Britain’s biggest grocer and the world’s third-largest retailer in the world, Tesco, has found itself involved in an accounting scandal that will only worsen the already existent crisis. “Last week, Dave Lewis, Tesco’s new chief executive stunned the City by revealing that a £1.1bn forecast of first-half profit, announced only a month earlier, had been overstated by £250m.” (Financial Times, 1 Oct 2014) The share prices dipped to a 10-year low and the sluggish performance continues for Tesco.
Scandals going unnoticed by top directors and executives of such large corporations deserves deep condemnation. Manipulation of financial information is more often than not, used for personal gain, and so this scandal must be investigated thoroughly to bring into light the culpable individuals. Tesco will face intense scrutiny in the coming months which will hamper it’s ability to compete against the growing European retailers.
The shortfall in profit is said to be caused by claiming revenues earlier and understating costs. Tesco in general has been in decline over the past years, and I feel this was a move also to showcase a non-existent strength to investors. Tesco revenues have been going down and it has lost a considerable portion of its market share to other European retailers. Tesco’s competitors are able to grow while Tesco is failing to maintain its growth and customers. The new CEO has a daunting challenge to restore Tesco’s public image and market success.
Citations:
Andrea Felsted, Caroline Binham and Claer Barrett (October 1, 2014) “Financial Conduct Authority investigates Tesco’s accounting woes”, Financial Times
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