Tesco slashes profit forecast

Tesco has revised its forecast for profits for the six months ended 23 August, saying it had previously overestimated it by £250m.

The food retailing giant cited “accelerated recognition of commercial income” and “delayed accrual of costs” as the main factors behind the overstatement and announced it was working to establish what impact those items would have on the full year.

"We have uncovered a serious issue and have responded accordingly. The chairman and I have acted quickly to establish a comprehensive independent investigation,” said group chief executive Dave Lewis.

"The board, my colleagues, our customers and I expect Tesco to operate with integrity and transparency and we will take decisive action as the results of the investigation become clear."

The decision to review its guidance marks the latest blow for the group, which had already issued three profit warnings in 2014.

Commenting on the announcement Clive Black, Head of Research at Shore Capital, told clients he was flabbergasted by the news, adding that it was “not the stuff of a well operated FTSE-100 organisation”.

He added that he does not yet know the full extent, cause, timing and outcomes, although he believes it should raise “much more fundamental questions over the Chairman's position and the nature, composition and extent of the Board, which to our minds has been lop-sided between executives and non-executive directors for far too long.

Nevertheless, Black believes there can be no suggestion of impropriety as regards the new chief executive officer.

As of 08:22 shares of Tesco were lower by 10.76% to 204.9p.