Tesco's Profits Hugely Overstated

[mikey4444]

http://www.bbc.co.uk/news/business-29306444

Does anyone have any idea what has happened here ? It seem a lot more serious that just getting the decimal point in the wrong place, or a simple arithmetical error.

[Peter Pedant]

I wondered if there were fraud
but it is too early to say

I wondered what the lucky four said to each other - before they were forced to own up ?

In 1120 the white ship disaster where the heir to the throne died, they didnt dare tell the king for a week ....and then got a servant to do it

[Peter Pedant]

Share price plummeted (10%) showing how much confidence and trust is related to share price

[mikey4444]

PP...might they have said " Every Little Helps" perhaps !

[DTCwordfan]

I'm not surprised that the share price has collapased today, the question is where the financial control is....apparently, a missed slab of operating costs are the driver to this and something that the UK and Group Controller should have picked up on. They still don't have the final number tied down and it it could be more or less, the matter in Deloitte's hands now.

Meanwhile, there is the announcement on their new strategy - http://www.theanswerbank.co.uk/Phrases-and-Sayings/Jokes/Question1367199.html

[DTCwordfan]

It's a bit more than just costs Tesco has essentially tried to recognise revenue too early and delay the recording of costs until a later date. Accounting is not a hard science and some of this behaviour is acceptable, within limits. What Tesco appears to have done is push the boat out a bit too far, ending up with revenue that hadn’t really been earned yet and costs that probably should have been booked earlier. This would not have happened where I was as to projects and consultancy services - in fact it was the other way around, we could book costs as they were incurred, profit only taken when the revenue came in and the service completed - thereby minimising liability risks.

[Peter Pedant]

Mikey // PP...might they have said " Every Little Helps" perhaps ! //

yeah but they would have had to have said it 250 million times

[DTCwordfan]

You might think that they could absorb this, but the loss of 250 is going to clobber their Return on Capital Employed which recently has been around 10% - it's going to take them down to under 8% and that is not acceptable in this sector with all the property involved. Secondly their net gearing has been slowly climbing with their (awful) store refits - now over 60% viz. 52% three years ago, so the debt coverage is needed.

[agchristie]

Tesco chiefs were bemoaning the lack of footfall for a drop in profits. Well, somebody has put their 'foot in it' on the number crunching...

[ToraToraTora]

I can only assume this is a c0ckup, surely no one at tesco would be stupid enough to think they could inflate the figures and no one would notice. Only the EU can get away with that level of falso accounting.

[jno]

a £2 billion error? Easily done, I'm sure.

[joggerjayne]

Time to dump the shares, then?

[ToraToraTora]

it was 250m jno, still I don't expect much.

[DTCwordfan]

I would consider bailing out as the forecast on profits is southwards as the competition intensifies, the other part of the equation, the cost of another retailing shift if they are going to start to discard some of their central non-food product ranges.

[joggerjayne]

I didn't mean me. I just meant generally.

[naomi24]

Coming from a huge concern, this doesn't make sense. I'll wait to hear more.

[237SJ]

No, don`t dump the shares. You don`t dump shares when the price is low. Wait until they pick up a bit (which they will do when the market has got used to the news) and then dump them.

[jno]

depends how you calculate these things, TTT, £2bn off their value

http://www.theguardian.com/business/2014/sep/22/tesco-loses-2bn-value-250m-profit-overstatement-investigation

You could be right, it could be a mistake; but DTC is more likely right that it's aggressive accounting that went way over the top.

[ToraToraTora]

yes jno 2bn off the value of the shares trading as a result of the error, the actual error was 250m that's what mikey was talking about "Tesco's profits hugely overstated" - it's in the title.