In what is probably the biggest financial error in commerce this year, Tesco announced that it overstated its profits. By a lot. The problem was caused by the company booking payments from suppliers as income. In fact, payments were used by the company to run promotions on the suppliers’ behalf.
Tesco is now under fire as forensic accounting investigators from Deloitte reported the company overstated profits expectations by £263m in the first half of 2014.
Not only that but profits overall are 92% down after a previous write down of £527m caused by the above mentioned error in registering income in previous years.
Nevertheless, Tesco is still the largest supermarket in the UK, leading the pack with a large market share:
Although its market shares have taken a hit, it seems that online sales are growing at 11% and I believe this is just the beginning. Following the unfortunate news eight executives were forced to leave the company, including chairman Sir Richard Broadbent.
Now the company is ready for a fresh start. Ok, scratch that “fresh”. It’s more like it’s forced to improve its omnichannel approach as customers demand better service and improved shopping experience. The company had previously employed several experienced directors to help it become a competitor to Amazon in global retailing. How well this would fare is hard to tell but they should get some award for trying. After all Tesco was the first to ship an online order.