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LONDON (Alliance News) - Tesco PLC said Tuesday that incoming Chief Financial Officer Alan Stewart will begin in the new role with immediate effect, just a day after the supermarket giant saw GBP2 billion wiped off its market capitalisation after it said it had overstated its first-half pretax profit guidance.
Britain's biggest supermarket stunned the market Monday after it said it had overstated its pretax profit guidance for the first-half by GBP250 million. Tesco has suspended four executives while it undertakes a thorough investigation into the issue.
Upon his appointment in July, Tesco said that Stewart would join the company on December 1, 2014. The company has been without a finance head for some time; outgoing CFO Laurie McIlwee has not been in the office for some time and has not been involved in recent weeks, Tesco said Monday. Stewart was poached from Marks & Spencer PLC, where he served as CFO.
The company said Monday that it was "exploring all possibilities," including whether to also bring in Stewart earlier than planned.
In a separate statement Marks & Spencer confirmed that Stewart's employment as CFO will formally terminate Tuesday. He has been on a period of garden leave since July 10, 2014.
In a serious blow to the struggling grocer's reputation and its first public announcement under new Chief Executive Dave Lewis, Tesco said Monday that it has launched an investigation into whether any staff have broken any rules, and it has suspended a number of people from duty, including four executives.
"We have asked four people in the organisation to step aside. I want to confirm that has nothing to do with disciplinary. I am not going to talk about named individuals," Lewis told journalists. He said that the problem with the audit figures was uncovered on Friday, after an "informed employee" bought it to the attention of the general counsel.
Tesco did not confirm whether one of those employees suspended was UK Managing Director Chris Bush, but confirmed that Robin Terrell has been bought on board to run the UK management team.
Tesco said the profit guidance overstatement for the six months to August 23 was due to the "accelerated recognition of commercial income and delayed accrual of costs", which it said was due to its relationship with its suppliers, and the payment it receives from them. It said the focus is on its UK business.
Lewis did not say whether the GBP250 million figure given could increase. "We have given the best indication we can, given the best information we have at the moment," said Lewis.
This means Tesco's profit for the first half ended August 23 will be only around GBP850 million, well below the GBP1.1 billion it had guided last month. That was its most recent profit warning, following profit expectation downgrades earlier in the year.
Tesco made a GBP3.32 billion trading profit in the whole of its last financial year, and GBP1.59 billion in the first half of that year.
The company did not say whether the GBP250 million figure was a hole in its profit, or just about revenue timing, and therefore a delayed profit.
Tesco last month brought forward the start date for Lewis and tasked him with conducting a review of the whole group, after it slashed its interim dividend, cut its capital expenditure plans, and said it expects trading profit to be significantly lower than last year. The grocer said at the time that trading conditions have remained challenging and that its ongoing investments in its customer offer - which includes big price cuts - have weighed on its expected performance.
By Alice Attwood; aliceattwood@alliancenews.com; @AliceAtAlliance
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