Tesco’s new chief executive, Dave Lewis, is set to announce early findings from investigations into the supermarket’s £250m accounting scandal this week. Leaks are already emerging, with one source telling the Telegraph that investigators from Deloitte and Freshfields have found evidence that a small group of Tesco staff deliberately misled auditors and accountants to hide poor financial results.
The scandal is thought to involve Tesco booking supplier payments that were conditional on hitting sales targets that were never going to be met. Such practices have been going on for some time, but were ramped up in the previous six months as Tesco’s performance slumped, the source said.
Lewis will update the market on the investigation’s initial findings as Tesco unveils its delayed half-year results on Thursday. Its trading profits for the period are expected to be around £850m, down from almost £1.6bn in the same period last year.
Lewis's predecessor Philip Clarke, who left just weeks before the profit overstatement was discovered, is expected to face calls this week to give back part of his £10m golden goodbye. It also emerged today that he has been dropped by Number 10 as one of the prime minister's business advisors.
And as if a domestic scandal wasn't enough, the retailer’s South Korean arm has been hit by allegations that it sold the personal data of more than five million customers to insurance companies. Investigators have warned that executives of Homeplus, as its called there, could face prosecution, and it’s been reported that some have been asked not to leave the country. There are murmurings that Lewis may be planning to sell off Tesco’s Asian operations to fund a UK turnaround, but that’s not exactly going to be easy when they’re under investigation.
Tesco’s share price has fallen by 48% since the start of 2014 as sales have faltered and it was rocked by scandal. The UK’s biggest private employer was dealt a further blow last week as the 'Sage of Omaha', Warren Buffet, announced he was selling 75 million of his shares after admitting he made a ‘huge mistake’ backing the supermarket.