Tesco has announced it will be launching a report after it found its profit forecast was hugely overstated.
The supermarket said that it is expecting its half-year profits to be overstated by £250 million and it is now looking into how this will impact on its full-year profits. It has appointed Deloitte to independently investigate the issue but still expects a £1.1 billion profit for the opening six months of the year.
In a statement, Tesco said that the "accelerated recognition of commercial income and delayed accrual of costs" was one of the principal reasons behind the overstatement in the half-year profits. The company said that it is carrying out work to establish the extent of the problems and will announce an update at its interim results, due to be announced on October 23rd.
Dave Lewis, chief executive of the Tesco Group, said: "We have uncovered a serious issue and have responded accordingly. The chairman and I have acted quickly to establish a comprehensive independent investigation.
"The board, my colleagues, our customers and I expect Tesco to operate with integrity and transparency and we will take decisive action as the results of the investigation become clear."
Tesco has faced increased competition in recent months with the rise of discount grocery chains such as Lidl and Aldi. The two brands have been growing in popularity of late and have put pressure on the traditional companies such as Asda, Morrisons and Sainsbury's as well as Tesco.
In August, Tesco saw shares drop to an 11-month low prompting it to cut its full-year profit forecast from £2.8 billion to £2.4 billion.
The supermarket explained that "challenging trading conditions" had affected the group's financial performances culminating in a loss of sales and market share. Compared to the same period 12 months earlier, the firm's half-year dividend was cut by 75 per cent.
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