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Tesco needs a lot of help – and that begins in the boardroom

It is not so long ago that the term Tescopoly was coined to describe the supermarket giant’s domination of the British grocery sector. The company’s expansion was such that it became both hero and villain in towns and cities across the country, some welcoming it with open arms, others campaigning against store openings which threatened local businesses.

The company, once the darling of the City, now finds itself friendless among investors who at the time of writing (1.30pm) had wiped 8% off the value of the company following its revelation that profits for the half-year have been overstated by £250m.

Four managers have been suspended while an investigation is undertaken into what one analyst described as a profits warning on a profits warning. New chief executive Dave Lewis, in post for only  a month, has been handed baptism of fire and admitted this morning he did not know exactly what has gone wrong.

Speculation has filled the void and it seems a whistleblower drew attention to the issue which has raised concerns about who knew about this and what may have happened. This has led to questions of the board and how much it is in control.

It appears the company has booked revenues not yet earned without accounting for costs that should have been logged earlier. However, it is broadly accepted that companies do this sort of thing quite legally, though it can be done to make profits look better than they are.

After the profits warnings and failure to make the breakthrough in the US, Tesco’s UK business may take three to five years to turn around at a time when it is being forced to discount in order to stem the loss of market share to the German firms Aldi and Lidl.

Does Tesco’s fall from grace make it a takeover target? Probably not, though no company is too big to succumb to acquisition. Marks & Spencer survived a bid from Sir Philip Green and Tesco will need to get its house in order to avoid a similar fate.

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