Shoppers and investors were taken by surprise when Tesco announced a £250m black hole in their profits last month. Tesco’s suppliers, however, were not.
The supermarket, the second-largest retailer in the world, has been under pressure for some time. Shoppers are increasingly turning their backs on the big weekly grocery shop in favour of home delivery services, discount rivals Aldi and Lidl and local convenience stores. These trends have hit sales at Tesco’s big out-of-town supermarkets and its market share has declined significantly in the past year. Profit warnings led to the resignation of the Chief Executive, Philip Clarke, in July. The honeymoon for his replacement, Dave Lewis, didn’t last long. In the first few days he was confronted by a whistler blower who warned that Finance were incorrectly booking payments received from suppliers related to in-store promotions.
Unfortunately Dave Lewis’s misery didn’t stop there. Recently, Tesco announced that its profits had been overstated by £263m, more than have been initially estimated and not long after, the Serious Fraud Office (SFO) confirmed that it is carrying out a criminal investigation.