Tesco has cut its profit forecast for the third time this year, sending shares down 12%, after finding a fault in its accounts. As Sonia Legg reports, it's the latest blow to the reputation of Britain's biggest grocer.
Declining sales and profit warnings - Britain's biggest grocer isn't having a good year. Tesco shares plunged 12% to a 10 year low after the latest blow - a revelation that it had overstated expected first half profit by £250 million. The error was discovered during preparation for next month's interim results. And emerged just three weeks after CEO Dave Lewis joined the company. (SOUNDBITE) (English): TESCO CEO, DAVE LEWIS, SAYING: "We have contacted four employees and asked them to stand aside so we can do a full and frank investigation. It is very important to understand that it is not a disciplinary or an indication of guilt. This is about getting to the bottom of a full and frank inquiry into what happened here." Lewis already knew he had to turn the tanker around. The former darling of the UK retail sector has been losing market share to Aldi and Lidl at one end and Waitrose and Marks and Spencer at the other. But Chris Hughes from Reuters Breakingviews says this development has alarmed investors. Some report that the MD of Tesco's UK business is one of the four. (SOUNDBITE) (English): CHRIS HUGHES, REUTERS BREAKING VIEWS, SAYING: "This is a big global blue chip company which appears to be saying that its internal accounts appear to have accelerated some revenue recognition and delayed some cost accrual and you just don't normally see this. There is something really flawed in either the culture or the systems and controls which is ultimately the responsibility of the board." Chairman Richard Broadbent says he won't resign, insisting he wants to be part of the solution. Lewis refused to speculate about the impact on the board. (SOUNDBITE) (English): TESCO CEO, DAVE LEWIS, SAYING: "This is a very big, very important, very good business. Whilst I will deal with this our focus as a business stays and will always stay on satisfying customers around the world. There are 500,000 people whose commitment to satisfying customers will not change today, tomorrow or next week." Tesco shares recovered slightly after the initial plunge. But the crisis isn't being helped by the lack of a Chief Financial Officer. Alan Stewart was appointed in July but won't start until December.