Tesco Plc is being investigated by the Financial Conduct Authority, UKs financial watchdog, after the company overstated its profit for the first six months of the year, the agency said, sending Tescos stock plummeting. The UK-based grocer nodded about the regulators probe, after it suspended four of its executives in light of its latest earnings report, where the H1 profit figure was exaggerated by £250 million ($405 million).
Tesco said in its statement that the company will “continue to cooperate fully with the FCA and other relevant authorities considering this matter”.
Two days after Tesco suspended four of its executives, the Financial Reporting Council confirmed that it is holding a close monitoring to the situation. Still, the regulator revealed that the Financial Reporting Review Panel can require the company to restate its financial statements.
The U.K.-based company called in neutral auditors and legal counsels to investigate the companys books.
“Such an investigation (by the FCA) can only be another distraction for new CEO Dave Lewis and represents another black mark on the board,” Shore Capital analyst Clive Black said in an interview for Reuters.
The investigation, and the whole accounting debacle, are a high hurdle for any new executive, and they have completely overshadowed Lewis “Feet on the floor” campaign, which sends top staff to retail stores to gather intel and better communicate operational info. One of those “top staff” would include the companys brand new CFO, Alan Stewart, who joined the company just over a week ago.
“Understanding customers even better is critical to our future success and there is no better opportunity for office colleagues than by supporting our stores in the run-up to Christmas,” a Tesco spokesman said.
The move comes as Tesco is losing market share and paring revenue growth, as discount retailers in the UK gain momentum.
Tesco Plc lost 4.15% to trade at GBX178.48 per share by 13:01 GMT, marking a one year change of -50.30%. The company is valued at £15.13 billion. According to the Financial Times, the 18 analysts offering 12 month price targets for Tesco Plc have a median target of £202.50, with a high estimate of £325.00 and a low estimate of £165.00. The median estimate represents a 8.75% increase from the last price of £186.20.
Do you think Tesco can rebound with the help of its new executives?
Share your thoughts in the comments below.
TradingPedia.com is a financial media specialized in providing daily news and education covering Forex, equities and commodities. Our academies for traders cover 
