“‘Tis the season to be jolly,” or so the old Yuletide carol goes. But for Britain’s embattled supermarket chain Tesco (LSE: TSCO), the stream of bad news relating to previous financial irregularities shows no sign of slowing as the Christmas season cranks into gear.
Just this morning the Financial Reporting Council (FRC), Britain’s accounting watchdog, announced that it would be launching an investigation into the company’s annual reports for fiscal 2012, 2013 and 2014. As a result, Tesco could be forced to restate its accounts for these years.
On top of this, the FRC said that it would be running the rule over Tesco’s conduct relating to the profits overstatement it made for the current year concluding March 2015. The chain had claimed back in August that it expected the half year to clock in at around £1.1bn, but was forced to backtrack less than a month later by saying that this estimate was bloated by some £250m.
The final figure released in October came in at a colossal £263m, the result of muddled supplier arrangements which saw Tesco book the profits for special promotions whilst delaying costs.
The crisis has led to many high-profile boardroom exits, including that of long-standing company chairman Sir Richard Broadbent, and prompted Tesco to appoint Deloitte to go through its accounts with a fine-tooth comb.
There is seemingly no going back for the supermarket’s former auditor PwC, either, which had a multi-decade relationship with the firm. And the FRC’s probe could result in significant fines and the striking off of particular individuals should any wrongdoing be proved.
Battered from all sides
And Tesco faces pressure from the Serious Fraud Office (SFO) and the Financial Conduct Authority (FCA) relating to August’s shocking mistake, who are also launching their own investigations into the firm’s reporting practices.
Indeed, The Sunday Telegraph reported yesterday that a number of Tesco’s suppliers will be requested to attend the SFO’s offices in the new year. The body wants to speak to staff at the likes of Diageo and Unilever concerning deals brokered with the grocery giant, as well as to closely examine agreements between the firms and Tesco.
Tesco is clearly not a stock for the faint of heart, and much more bad news could come out in the wash in the coming months.