MOSCOW, September 22 (RIA Novosti) - Britain's biggest retailer, Tesco, has launched a probe into its accounting practices after the company overstated its half-year profit forecast by some 250 million pounds ($408 million), Bloomberg reported Monday.
"We have uncovered a serious issue and have responded accordingly," the company's new CEO Dave Lewis was quoted as saying by Bloomberg.
"We will take decisive action as the results of the investigation become clear," Lewis said, adding that the company would report interim results on October 23, Bloomberg reported.
The company's massive projection error resulted from calculating incomes that had not yet been earned and recognizing costs after they were incurred, Bloomberg reported.
Tesco's stock slumped by 11 percent to 204.9 pence as of 8:06 a.m. local time (07:06 GMT) and has lost 39 percent of its value this year, bringing the company to its fifth straight annual decline.
"It was evident to many that there was a lot of kitchen sinking coming and we had seen that the accounts were overstretched," Sanford C. Bernstein analyst and former Tesco executive Bruno Monteyne said, Bloomberg reported.
"To David Lewis" credit, he is again on the front foot, tackling the issues head on. It raises serious questions though for the board and Phil Clarke," Monteyne added.
The company's chief executive officer succeeded Phil Clarke, who was forced to leave the position in July after leading the company through three years of losses. Under Clarke, Tesco spent more than 1 billion pounds to upgrade stores with playgrounds, bakeries and even Zumba dance lessons to win back customers. The former chief executive also boosted Tesco's presence online.
Tesco suffered its worst sales decline in over two decades when revenue dropped 4 percent during the 12 weeks leading to August 17 as its market share decreased by 1.4 percent to 28.8 percent, according to Kantar Worldpanel data.
Tesco, founded in London in 1919, is a multinational grocery and retailer based in Cheshunt, Hertfordshire. The company currently operates some 6,500 stores worldwide.
