British grocery chain Tesco is the country’s biggest supermarket, Europe’s largest private employer, and world’s second-largest retailer — second only to Walmart.
And it’s a total basket case.
After revealing in late September that it overstated profits by £250 million, the grocer revised that number upward today to £263 million, culminating in the resignation of Tesco’s chairman, Sir Richard Broadbent.
Tesco’s new CEO Dave Lewis has been left to pick up the pieces, while at the same time dealing with a separate but equally massive problem: disastrous global sales results. The share price has dropped by more than half in the last 12 months.
So what went wrong?
But his company's market share eventually surpassed Sainsbury's, becoming nearly twice as big as it nearest rival.
Tesco opened hundreds of stores in China. But its largest presence outside the UK is Homeplus, its Korean arm, with over 400 stores. It also operates in India, Malaysia, and across the EU, often under different banners.
The expansion in the early 2000s put it next to France's Carrefour for the title of the world's second biggest retailer (Walmart is first).
In real terms, Tesco's sales per square foot are currently at their lowest levels since 2005. After accounting for inflation, it's even worse.
Tesco began talking to China Resources Enterprise, a massive domestic retailer, about a potential partnership. In May 2014, it was announced that the Tesco's Chinese arm would merge with CRE, but that Tesco would only take a 20% stake in the firm.
The partnership still isn't profitable, according to Reuters.
Things started to turn south in 2013 when Tesco reported its first drop in profits in 20 years. That same year, the company decided to exit the US market.
In September 2013, Tesco agreed to sell more than 150 Fresh & Easy stores that it had set up just seven years earlier in the south and west of the US.
The grocery chain called the move 'an orderly and efficient exit from the US market.'
Accountancy giant Deloitte was brought in to investigate. The retailer had warned months earlier that the way it registered commercial income was 'at risk of manipulation' by auditors.
It also became apparent in the days after the announcement that Laurie McIlwee, Tesco's finance director, was not actually at work. McIlwee had already handed in his notice and had been effectively absent during the search for a replacement.
Tesco suspended four executives in the immediate aftermath of the profit fiasco, and a further three this October.
On Thursday, after Deloitte confirmed the income statement error and increased the overestimate to £263 million, it announced that chairman Sir Richard Broadbent was stepping down.
Former Unilever executive Dave Lewis only joined Tesco as its new CEO a few months before the massive profit error was announced. He told investors he had no idea Tesco was so screwed up.
Lewis took over from former CEO Philip Clarke, who resigned.
Tesco's share price peaked at nearly £4.87 in 2007, dropping to £2.95 in late 2008 after the financial crisis.
Tesco's share price rose back to above £4 for a lot of 2010 and 2011, when the economy was still weak. It is down to less than half of that now.
The firm has issued four profit warnings in the last three years.
Now the supermarket's market share is firmly below 30%, falling to 28.8% at Kantar Worldpanel's last count.
Tesco is still the biggest by a distance, but holding that position is proving difficult.
Lewis and new CFO Andy Stewart will be at the head of attempts to reform the company.
Entrepreneur Luke Johnson is sceptical, noting that no member of the 10-strong board of directors has any retail experience.
In an October report, 'UK Big Four to Suffer Further Margin Declines,' credit ratings agency Moody's predicted that cost-cutting European firms like Aldi and Lidl will continue to nibble off market share from the major retailers.
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