Just when it seemed affairs at Britain’s biggest supermarket chain couldn’t get any worse, they did. PETER FROST investigates
Just a month ago we reported on serious failings at stumbling supermarket giant Tesco — new top boss Dave Lewis seemed to have his work cut out to try to save the ailing company.
A whistleblower had revealed that the existing management team have cooked the books to the tune of £250 million. Now that figure has gone up to £263m and shares have plummeted another 6.5 per cent.
Underlying profits slumped to £783m, almost half the previous year. Sales continued to tumble. Not so long ago Tesco captured one pound of every seven spent on British high streets.
Accountancy firm Deloitte has completed its investigation into Tesco’s misreported profits.
It found that profits were overstated by £118m in the first half of this year, by £70m in 2013-14 and by £75m before that.
This will be a huge embarrassment for David Cameron and Nick Clegg’s City darlings, PriceWaterhouseCoopers (PwC), which has been Tesco’s official auditor since 1983. It was PwC’s job to spot and report what was going on.
Tesco, it seems, had been doing dodgy deals with suppliers over promotions, effectively asking thousands of pounds for good positions on the shelves.
Many suppliers are now coming forward to report this and other bullying tactics from Tesco.
Deloitte’s report is being passed to the other regulators and may well lead to legal action or huge financial penalties.
Meanwhile, Tesco’s trading performance continues to deteriorate.
Like-for-like sales fell 4.6 per cent and pre-tax profit slumped to £112m, down more than 90 per cent on the previous year.
Profits before tax were £783m, almost half the previous year’s figure.
Some suggested that Tesco would try to raise more money from corporate shareholders to help pay to save the business.
Lewis surprised nobody when he said the company is not working on a rights issue at the moment.
Instead, Lewis plans to cut costs and sell assets. Tesco’s already beleaguered shop-floor staff are preparing themselves for more wage cuts, sackings and exhortations to work harder in the run-up to Christmas.
Just a month ago Tesco chairman Sir Richard Broadbent told us that he was there for the long term.
Now he is walking out of the door, pausing only to arrange the obscenely huge payout that seems the standard in huge companies and banks to reward abject failure.
Another bonus for failure has gone to Philip Clarke, the former chief executive of Tesco, who stepped down in July after the company announced a profits warning.
Tesco says his golden goodbye, widely reported to be worth £10m, will be delayed until the Financial Conduct Authority (FCA) completes its investigation into the overstated profit.
The number of other senior bosses who have had their laptops and company phones seized and been sent home on gardening leave has almost reached double figures.
No doubt many of them will be shown the door with only a Tesco carrier bag full of money to ease their departure.
Meanwhile Tesco is still managing to generate the usual flood of embarrassing press stories sinking its reputation still further into the mire.
Three Tesco staff in a London store reduced a poor blind customer to tears when they shouted for her and her clearly recognisable guide dog to get out of the store.
At first Tesco offered a measly 20 quid compensation for her hurt and embarrassment.
Contrast that 20 quid with the £30m Tesco paid for a new private executive jet, delivered a few weeks ago.
It bought the supermarket giant’s jet fleet to five and resulted in a rapid announcement that some of the aircraft would be sold off and top Tesco bosses would henceforth travel from Tesco’s Cheshunt offices to London by train.
Meanwhile, in Great Yarmouth Tesco declared war on the endangered wild bird the wagtail.
Managers threatened to shoot a bird trapped in their store. Public opinion and TV’s Chris Packham stopped them in their tracks and, rather that shooting the wagtail, Tesco seems to have shot itself in the foot — again.
Tesco’s Asian supermarket chain Homeplus is still under investigation in South Korea for selling customers’ private information to insurance companies.
South Korean authorities are also probing allegations that employees rigged a competition so friends would snap up the main prize of a BMW.
Lewis will be considering selling off some of Tesco’s worldwide empire, but this might not be a good long-term strategy as growth in Asian countries is predicted to outpace home sales in future years.
When Lewis took over the top job at Tesco just a month ago, retail analysts pointed out he had no supermarket or high street experience.
He has made his reputation at Unilever, where one of his outstanding successes was the deodorant range. He had championed Dove, Sure and, best of all, Lynx.
Lynx is a particularly pungent aerosol spray much favoured by spotty adolescent boys whose mothers generally advise more thorough washing rather than another spray of Lynx.
There is a lesson there for Lewis and Tesco. They need to really clean up their act if they want to get rid of the stench that currently emanates from their stores.
A quick spray of Lynx — or anything else — just won’t do the job.
Peter Frost blogs at frostysramblings.wordpress.com.
On a personal note …
WHILE preparing this article my computer printer ran out of ink. It was late in the evening and the only shop selling ink this late was, you guessed it, the local Tesco.
Feeling slightly hypocritical I popped into town and bought a Tesco own-brand ink cartridge. Gamekeeper turned poacher indeed.
Back at home my printer reported the newly fitted cartridge both “Empty” and “Not a genuine replacement.” It also firmly refused to print the article.
In the pack was a free Tesco 24-hour helpline number. I rang it but it wasn’t answering.
Several calls to the local store finally established the helpline no longer existed. All they could offer was for me to bring back the cartridge in the morning, with the receipt for a full refund.
Whoops, Tesco. Something else you need to look at.
This article first appeared in the Morning Star 27 October 2014