Tesco has suffered more turbulent times as Britain’s biggest supermarket chain reported a much deeper than expected hole in its finances.
The third largest grocery group in the world saw it shares again after admitting that accounting transgressions went back further than initially thought.
Chairman Richard Broadbent, accused by many investors of poor corporate governance during his three years in that job, is to step down.
Nik Stanojevic, financial analyst at Dolphin Brewin, approves: “The change of management is a very good thing for Tesco. This is a company that’s had a very growth-oriented strategy. Their share of the market is shrinking, the share of non-discounters is shrinking. Often it takes a change of management in order to go from a growth mentality to a profitability, no-growth mentality.”
Tesco has been squeezed by fierce competition from discounters Aldi and Lidl and more up-market rivals like Waitrose and Marks & Spencer.
The big out-of-town stores it championed are now also out of fashion, with more people preferring to shop little and often at local stores or online.
Natalie Berg, a retail analyst at Planet Retail UK, said: “There’s no denying that shoppers will continue to shun that out-of town superstore format, they’ll continue to look online, there are huge structural shifts, and Tesco absolutely needs to reconfigure itself.”
It also needs to rebuild its finances after a 263 million pound (333 million euro) hole was found because of the accounting mistakes.
The new chief executive Dave Lewis, just seven weeks in the job, admitted he could not forecast full-year profit, as he still does not know the full scale of Tesco’s problems.
The results showed the scale of the crisis.
Second-quarter organic sales in Tesco’s home market, excluding fuel and VAT sales tax, fell 5.5 percent. That compared with a 3.8 percent drop in the first quarter, which was described at the time as the worst performance in 40 years.
Tesco Asia saw trading profit fall 9.2 percent. The Europe business was up 42 percent, but that was from a low base.
Tesco’s shares finished the session down 6.5 percent on Thursday at an 11-year low.