Tesco chairman to quit as pre-tax profit falls 90%

Pre-tax profits fell to £112M compared with the same period of last year, while ike for like sales, excluding petrol, fell by 4.4%.

On a brighter note, the retailer reported UK online sales up by 11% and like for like sales growth of 0.8% in UK convenience stores.

But it also added an extra £13M to its overstatement of pre-tax profits; posted as £250M in August. The latest admission follows an investigation by accountants Deloitte into the misreporting of Tesco accounts.

Broadbent said: “The issues ​[financial reporting errors] that have come to light over recent weeks are a matter of profound regret.”​ A new management team – including a new chief executive and chief financial officer –  was in place to address the causes of the mis-reporting.

‘My own succession’​

“Once this transition is complete and business plans are in place, it will mark the beginning of a new phase for the company and I will begin now to prepare the ground to ensure an orderly process for my own succession at that time.”​

While not specifying a date for his departure, Broadbent said his decision reflected the principle of accountability on behalf of the board and will help the company “draw a line under the past as it enters the next phase of its development”.​

New chief executive Dave Lewis claimed that while trading conditions remained tough and the retailer’s underlying profitability was under pressure, it faced the challenges from “a position of market strength …”.​

Lewis said his review of the whole business had yet to be completed but three priorities had become clear. Those were: to recover Tesco’s UK competitiveness, protect and strengthen the balance sheet and to begin “the long journey back to building trust and transparency into our business and brand”.​

‘Never recall a period so damaging’​

But City and retail analysts remained unimpressed. Shore Capital analysts Clive Black and Darren Shirley said: “We can never recall a period so damaging to the reputation of the company as the first half of financial year 2015. ​

–That a powerhouse of international retailing was reduced to a rudder less corporate entity where downgrade followed downgrade, executive followed executive out of the business, with no effective succession planning, capped by a material accounting issue, reflects to a detrimental extent, to our minds, upon those who are the guardians of Tesco on behalf of its owners.”​

Shore Capital said the disclosure of the profits overstatement, now totalling £263M, hopefully marked “the darkest hours”​ for the group and that now a new chapter could begin. It retained its ‘hold’ advice on Tesco stock.

Planet Retail said the retailer seemed to lack any coherent recovery plan. “Like-for-like declines in almost all markets – including the UK – are now the norm for a company that seems bereft of any solution that might arrest its vertiginous decline”​ said its retail analyst David Gray.

Although down, Tesco was “not quite out cold yet”,​ he added. Tesco remained the UK's most profitable grocer and was one of the glob’s biggest convenience store players. The retailer's global convenience store sales will rise to nearly £11bn by 2018, from their present level of £6.9bn, he predicted. 

Read more reaction to Tesco's results – including accusations that it is “a rudderless ship”​ –here​.