Tesco share price: Chief executive ‘shocked’ by profit overstatement

Tesco’s (LON:TSCO) chief executive has told court that he was ‘shocked’ to be told only 19 days after starting his new job that the grocer had misstated its profit forecast by nearly £250 million, The Times reports. Dave Lewis’ comments come amid an ongoing trial of three former Tesco executives over 2014’s accounting scandal.

Tesco’s share price has been little changed in London this morning, having inched 0.06 percent lower to 179.70p as of 08:34 BST, slightly underperforming the broader UK market, with the benchmark FTSE 100 index currently standing 0.26 percent higher at 7,575.01 points. The group’s shares have lost more than 14 percent of their value over the past year, and are down by some 13 percent in the year-to-date.

Dave Lewis testifies in trial

The Times reported this morning that Tesco’s chief executive Dave Lewis had told Southwark crown court yesterday that although he was aware before taking the top job that Britain’s biggest grocer had a tense relationship with its suppliers and a weak balance sheet, he had received no hint that its reported figures may have been misstated. Lewis explained that he had become aware of the problem when he was called out of a meeting by Tesco’s top lawyer and presented with a document which showed that income from suppliers may have been ‘pulled forward’ improperly to inflate profits artificially.

‘Significant problem’

“I had never seen anything like this before,” he told court, as quoted by the newspaper. “You don’t need to be a lawyer or an accountant to know that the accusation of not recognising income and costs in the right period is a significant problem.”

He further noted that he became aware of practices at Tesco such as ‘diving for the line’, where it would cut heating and lighting in stores to reduce costs and help hit profit targets before the year end.

As of 09:05 GMT, Friday, 03 November, Tesco PLC share price is 179.90p.