When former Unilever executive Dave Lewis took over as Tesco’s new CEO in July — three months earlier than expected — he had no idea of the time bomb he was inheriting.
In September, the world’s second largest retailer announced that it overestimated its first-half profits by £250 million ($US408 million), sending shares crashing. The British-based grocery chain swiftly axed four senior executives and hired an independent firm, Delloite, to investigate the accounting scandal.
On Thursday, the Delloite review confirmed that Tesco overstated its profits by £263 million, an increase from the initial estimate. The company also announced that Sir Richard Broadbent would step down as chairman. A bunch of other executives have been asked to leave, too.
The company also reported a steep fall in sales and revenue, down 4.6% and 4.5%, respectively. Pre-tax profit is down 91.9% from the same period last year to £112 million.
In addition to addressing the disastrous results, Lewis discussed in a CEO call how the investigation has been progressing thus far: “The Tesco part of the investigation and the Delloite part of investigation has been focused on identifying around commercial income exactly what the numbers are.”
Lewis also said that Delloite has prevented the company from continuing its own investigation: “What we can’t do is start an investigation around how those numbers came about and what it was that caused those numbers to be there because there will be an investigation by the regulator and we will be very open and very proactive in our support of their investigation but it’s not for us to start that investigation — that’s something that we have to support them with. So we have to wait for that.”
What’s more, Lewis made the extraordinary admission that he would have taken the executive role even if he had known about Tesco’s structural problems before being given the job.
It is a surprising statement because it implies that the people who hired him — Broadbent et al — did not tell him about the disaster looming inside Tesco’s books until after he arrived.
Lewis had some idea that things were sliding at Tesco, of course. When former CEO Philip Clarke stepped down, revenue was tanking. Tesco’s problem’s were market-related and Lewis, a marketing guru, was probably under the impression he could swoop in and turn things around.