Epic error or stupendous scandal? Tesco’s £250m black hole » SMEInsider

Epic error or stupendous scandal? Tesco’s £250m black hole

Three days ago, the world’s second largest retailer admitted to making a £250m error in its profit calculations. But with many expressing disbelief at the scale of the error, is this a shambolic mistake or a serious scandal?

Adrian Bailey, Chairman of the Parliamentary Business Committee, has described the situation as “stratospheric,” finding it “unbelievable” that Tesco could be in “such a mess.” Observers such as the entrepreneur Luke Johnson, who sold a business to the retailer last year, has gone further, suggesting that “woeful” stewardship and a widespread lack of relevant experience is to blame, and suggesting that this disaster is symptomatic of deep rooted problems at the company that go far beyond accounting miscalculations.

By importing banking veterans with little understanding of retail, Johnson says, Tesco’s main board lacks essential skills in “property, logistics, buying, merchandising, staffing and myriad other activities” that may have plunged this “national asset” into serious trouble, not least because they would struggle to identify if figures within the company were, as has been hinted by some, “cooking the books”.

Tesco’s share price has fallen 11.8% since the £250m profit hole came to light and seems likely to face serious hurdles as it struggles to regain its credibility. New Chief Financial Officer Alan Stewart has been called in to begin his role two months earlier than planned, whilst four unnamed senior executives have already been asked to leave the company.

Despite the flurry of activity behind the scenes, Tesco has so far been guarded in their public pronouncement of the causes of the disaster. “We have uncovered a serious issue and have responded accordingly,” said Dave Lewis, Tesco’s much-beleaguered brand new CEO, who has recruited Deloitte to make a comprehensive review of its accounts.

For the time being, that has seemingly been enough to satisfy the Financial Reporting Council, which says that it is keeping an eye on developments but will not look into the matter until Tesco has completed its own investigations. Until that time, speculation over the scale of the crisis continues to mount.

  • kensington

    what is difference between shambolic mistake or fraud or what does scandolous means in these cases…
    Well– Why do we criticize Tesco…. Members Of Parliment done it, Celberties of comedy, and cinema done it and many highly paid profesionals in the postion of importance and trust have done it …

    Rulers around th e world done it … why should not Tesco Managment who receives millions of pounds in salary and bonus sees all these highly well educated colleagues are doing it and are left behind, after all they are part of special clubs meeting and discussing ….

    Energy Gas and many other Utlities done clever things .. why not they do not do it, they just caught on this occasion and they may have been doing few millions here and there over the years and werer not found….

    OH, lets go after small businesses or individuals . sad sad sad

    .. the system is geared to… penalize

    maybe it is time to put better foundation for 2030, since it is too late to fix the current trend
    maybe make a plan for children– Education & citizenship, humanity .. love and lot more so future children are not fraudsters, gangsters, Terrorists

    Lets make Laws that benefits all the people not some of the people some of the time .

    • LindseyKennedy

      Hi Kensington, thanks for commenting. The issue at the moment is that it is now yet known whether the “profit black hole” was due to incompetence or, possibly, to fraud. This does indeed make a difference as the latter would potentially mean a criminal investigation.