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Tesco launches investigation into profit guidance Tesco shares dive amid profit guidance probe
(about 1 hour later)
Tesco has launched an investigation after revealing that its guidance on half-year profits was overstated by around £250 million. Tesco suffered fresh humiliation today after a shock admission that it overstated its profits guidance by £250 million.
The supermarket has asked Deloitte to undertake an "independent and comprehensive" review of the issues, which involved the accelerated recognition of commercial income and delayed accrual of costs. Shares in Britain's biggest grocery chain dived to their lowest level in 11 years as the revelation caused its third profits warning in as many months.  Tesco also revealed number of staff, including UK managing director Chris Bush, have been asked to step aside from their roles while the investigation is carried out.
In its latest profits warning at the end of August, Tesco had said it expected trading profits to be in the region of £1.1 billion. The supermarket has asked Deloitte to undertake an "independent and comprehensive" review of the issues, which involved the accelerated recognition of commercial income and delayed accrual of costs. Deloitte will work alongside Freshfields, the group's external legal advisers.
New chief executive Dave Lewis, who started in the role on 1 September, said: "We have uncovered a serious issue and have responded accordingly." Shore Capital Stockbrokers analyst Clive Black said: "These are serious times for Tesco and its shareholders. We are flabbergasted by this development."
The supermarket was expected to release its interim results on 1 October, but this has now been pushed back to 23 October as a result. Writing on wall for Tesco's Broadbent? Shore cap: "this development must raise much more fundamental questions over the Chairman's position"
More follows Crikey. It's properly falling apart at Tesco. Amazed if chairman will survive this. Robin Terrell as interim UK MD a good move. Talented man
The investigation relates to Tesco's latest profits warning at the end of August, when it said half-year trading profits would be in the region of £1.1 billion.
The company admits that the issues uncovered in its UK food business mean the figure is likely to have been overstated by £250 million, leaving profits down by around 46 per cent on the £1.58 billion a year earlier.
New chief executive Dave Lewis, who started in the role earlier this month, said: "We have uncovered a serious issue and have responded accordingly."
The errors emerged during the company's preparations for half-year results, which were set to be released on 1 October, but will now be announced on 23 October.
Lewis took over from Philip Clarke, whose departure from the retailer he joined 40 years ago was brought forward after the profits warning at the end of August.
The previous profits guidance of £1.1 billion for the half-year to August 23 was already well below the City's forecasts, even before today's disclosure that profits had been overstated by around £250 million.