From the Tesco fraud trial: Accounting scandal to bumper profits yet still 4,500 jobs must go

877
From the Tesco fraud trial: Accounting scandal to bumper profits yet still 4,500 jobs must go

Tesco to cut 4,500 jobs across 153 Metro stores

Around 4,500 staff at Tesco are set to lose their jobs in the latest round of redundancies at the UK’s biggest supermarket.

The majority of workers will go from Tesco’s Metro stores, with other positions going at some Express and larger stores, the company announced.

Bosses want to overhaul the Metro stores, which are bigger than Express stores but smaller than larger supermarkets, saying that shoppers tend to use them for top-up shops, rather than buying bigger baskets.

‘Cost pressures’

The company said the Metro format was originally designed for larger, weekly shops, but now nearly 70% of customers used them as convenience stores, buying food for that day.

Tesco, which employs about 340,000 people in the UK and Republic of Ireland, said that changes to the stores would now include:

  • “faster and simpler” ways of filling shelves, with fewer products stored in the back rooms and more stock going straight to the shop floor
  • staff working “more flexibly” across the store to improve customer service at the busiest times of the day and in the right areas of the store
  • “leaner” management structure.

“In a challenging, evolving retail environment, with increasing cost pressures, we have to continue to review the way we run our stores to ensure we reflect the way our customers are shopping and do so in the most efficient way,” Mr Tarry added.

Tesco Metro shops are sized between Tesco superstores and Tesco Express shops. They first opened in 1994.

It is also making some changes in 134 of its 1,750 Express stores, where customer footfall is lower.

Changes in those stores will include “a slight reduction in opening hours during quieter trading periods at the start and end of the day, and simplifying stock routines”.

Tesco is in the midst of trying to save £1.5bn as the competition between supermarkets intensifies. It comes as German budget rivals Aldi and Lidl continue to put pressure on the big four supermarkets.

The Tesco accounting scandal

News of Tesco’s accounting scandal sent shockwaves through the City in 2014 and raised serious questions over how a FTSE 100 firm could get away with “cooking the books”.

The grocery giant issued a series of profit warnings in the run up to the September announcement about overstated profits, as the group reeled under the disastrous reign of then-chief executive Philip Clarke.

Mr Clarke, who left the retailer just before the scandal, presided over a tumultuous period for Britain’s biggest retailer, in which market share slumped as Tesco came under pressure from discount rivals Aldi and Lidl.

The bombshell disclosure came on September 22, when the company admitted that issues uncovered in its UK food business meant it was likely to have overstated profits by £250 million.

The disclosures wiped £2 billion off the supermarket’s share price in one day, and the overstatement was later revised up to £326 million.

Tesco ordered an immediate review into the errors, undertaken by Deloitte and law firm Freshfields, but the damage had already been done.

Tesco suspended eight directors and the Serious Fraud Office (SFO) charged three former executives – Carl Rogberg, Chris Bush and John Scouler – with fraud after the black hole was discovered.

To compound matters, the scandal contributed to Tesco’s £6.4 billion loss in 2015, one of the largest in corporate history.

In 2017, Tesco reached an agreement with authorities over the scandal that saw it pay £85 million in compensation payouts to investors and £129 million in fines and costs.

The Deferred Prosecution Agreement (DPA) with the SFO saw the company escape prosecution but book a total hit of £235 million.

The agreement came as Britain’s financial watchdog, the Financial Conduct Authority, concluded that Tesco had committed market abuse.

Although Mr Clarke was spared charges linked to the scandal, Mr Rogberg, Mr Bush and Mr Scouler – the former finance chief, managing director and food commercial head – faced a lengthy court case that eventually began in 2017.

They stood accused of being involved in a “white-collar crime” plot and were charged with fraud by abuse of position and false accounting.

The three men’s first trial was abandoned in February 2018 after Mr Rogberg had a heart attack. His case was then postponed and the SFO pursued a re-trial of Mr Bush and Mr Scouler before the case was halted in December in a highly unusual move.

There was never any evidence of my wrongdoing and I should never have been charged

Carl Rogberg

The three acquittals are a severe blow for the SFO, headed by new director Lisa Osofsky, and will lead to questions about its investigation of the scandal.

The outcome also raises questions about why Tesco Stores Ltd agreed a £129m plea bargain, known as a Deferred Prosecution Agreement, with the SFO to avoid criminal prosecution when no one has been convicted.

The DPA document signed in April 2017 and published on Wednesday names all three men — even though they have now been acquitted by the criminal courts.

TODAY: Tesco has posted bumper full year profits making up losses

Tesco has posted bumper full year profits as the UK’s biggest retailer approaches the home stretch of its turnaround under chief executive Dave Lewis.

For its financial year ending February 23, the Big 4 grocer reported a better-than-expected 34 per cent rise in full-year operating profit to £2.21 billion – ahead of analysts’ expectations of £2.08 billion and up from £1.64 billion recorded in the previous year.

Meanwhile, group sales rose 11.5 per cent to £56.9 billion and the supermarket giant recorded its 13th quarter of like-for-like sales growth in the UK, with a 1.7 per cent increase in the final quarter.

On a full-year and group-wide basis, Tesco’s like-for-likes grew 1.4 per cent.

The supermarket giant also reported a 28.8 per cent rise in annual pre-tax profits to £1.67 billion.

Statutory revenue came in at £63.9 billion, an 11.2 per cent year-on-year growth, while statutory operating profit was £2.15 billion – a 17.1 per cent year-on-year uptick.

“After four years we have met or are about to meet the vast majority of our turnaround goals,” Lewis said.

“I’m very confident that we will complete the journey in 2019/20.

“I’m delighted with the broad-based improvement across the business. We have restored our competitiveness for customers – including through the introduction of ‘Exclusively at Tesco’ – and rebuilt a sustainable base of profitability.

“I’m pleased that we are able to accelerate the recovery in the dividend as a result of our continued capital discipline and strong improvement in cash profitability.”

The group issued a final dividend of 4.1p, giving a full-year return of 5.77p per share.

CORPORATE GREED

This smells of cuts for profit, designed to make up losses for disgruntled shareholders at the cost to the working class and their jobs.

Asda workers ‘forced to sign’ new contracts or ‘face the sack’ LINK

Support Labour Heartlands

This is a "Pay as You Feel" website. You can have access to all of our online work for free. However if you want to support what we do, you could make a small donation to help us keep writing. The choice is entirely yours.

HELP US GROW BY SUPPORTING US

HELP US GROW.

The future can be ours - but only if we work together to make it happen. We've been fighting to make the Labour Heartlands a better, more fairer and equal place for over two years now. With a dedicated team and the commitment from our generous supporters giving small regular donations each month, more if they can afford it, we're winning. But there is still so much to do. We're ambitious, but we can only continue to make positive change and shape our country if more of our supporters join us on this journey. If you believe in the issues we fight for please take action and join Labour Heartlands grassroots think-and-do-tank today. It will make all the difference. And then we can make all the difference for everyone.

Not funded by millionaires or advertisers.
Labour Heartlands funded by the people.