Tesco, it has emerged, has been cooking the books for years.
Today outgoing chairman (as of today) Sir Richard Broadbent announced that the overstatement of its profits amounts to £263m (as opposed to the earlier estimate of £250m) and goes back to well before the first half of this year, as previously indicated. Of the 263m ‘just’ £118m relates to 2014 with the balance relating to 2013 and prior years.
This is staggering and makes you wonder what auditors PWC were up to as Tesco’s management mugged its suppliers for extra payments; booking them early and pretending that there were no costs or rebates payable. There’s a word for this and it begins with ‘f’. For the record, first half 2014 pre-tax profit fell from £1.47bn to £783m. Profit after tax fell from £1.39bn to £112m. Assuming these numbers are correct of course; accountants Deloitte and law firm Freshfields are still investigating.
All of which leaves Tesco’s new CEO, former Unilever exec Dave Lewis, up a well-known creek without a paddle. Lewis should be concentrating on reviving Tesco’s sales, currently falling at six per cent a year, way ahead of other rivals that have been clobbered by the rise of Aldi and Lidl and UK shoppers’ disenchantment with horrible supermarket sheds. That’s why Lewis, a marketing man by trade, was brought in to replace hapless predecessor Phil Clarke, a Tesco lifer.
It’ll take a bit more than some nifty marketing to fix this mess; Lewis must be praying that Tesco finds a new chairman (who may well turn out to be an executive chairman – ie the real boss) to deal with the legals and other issues while he tries to fix the stores – and not just the ones in the UK either.
In the meantime, one of the unwitting players in this drama we can feel sorry for is agency Wieden+Kennedy. W+K has been grappling with Tesco since it won the business, supposedly worth north of £100m, from The Red Brick Road in the summer of 2012. W+K has conspicuously failed to work its usual magic on Tesco, but that seems hardly surprising given the nature of the beast it’s been working for. Tesco hobbled it from the start by insisting it kept the ‘Every Little Helps’ tagline. Which is like buying a dog and then barking yourself. But that’s Tesco for you, an arrogant bunch at the best of times.
Well it’s humble pie all around now. W+K’s Christmas campaign is, presumably, in the can already and buckets of airtime have, presumably, been booked. The most sensible thing for Tesco to do might be to shut up but another big financial write-off is hardly going to please shareholders.
Who’d be an agency?