Suppliers in the frame with Tesco profits hit

By Rick Pendrous contact

- Last updated on GMT

Rick Pendrous, editor, Food Manufacture
Rick Pendrous, editor, Food Manufacture

Related tags: Cold chain

Tesco’s bombshell announcement last month that it had overinflated its profits by a staggering £250M for the first six months of the year has really put the proverbial cat among the pigeons.

The subsequent suspension of four senior executives and massive share price slide are just the latest signs that all is not well at Britain’s biggest multiple, already under fire for its falling sales. But the concern this incident has raised in the commercial world is unprecedented.

The challenges facing Tesco’s new chief executive Dave Lewis to put things right look immense. Although, his newness to the post has probably saved him from the ire being directed at chairman Sir Richard Broadbent.

But, as ever, it is the detail of the £250M inflated profits that is likely to be of more concern to Tesco’s many suppliers. They have already been identified in some press reports as being at the centre of what went wrong. And they will inevitably be the focus of putting things right too.

Questions

Questions have been raised about ‘accelerated payments’ from suppliers for in-store promotions and extra payments by suppliers when sales targets were hit. Other problems, apparently, related to figures for food that was past its sell by date and ‘shrinkage’ the term used by the industry for stock theft and other supply chain losses.

The wider fear is that the dodgy accounting practises identified, in which Tesco took an overly rosy view of its financial results are not isolated. One industry analyst remarked that Tesco was not the only FTSE 100 business to have had problems of this sort – albeit this was an extreme example.

Expect the big city auditors to scrutinise retailers’ financials far more closely in future.

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