Tesco angers investors as storm clouds gather
Just two weeks ago, Tesco chief executive Dave Lewis was hailing a “strong Christmas” as evidence of the retail giant “making progress”. UK like-for-like sales had risen 1.3 per cent in the six weeks ending 9 January, and Lewis was particularly pleased with international growth.
When good news is hard to come by, every little helps. Relatively positive figures at the start of this year were taken as a sign that the boss dubbed “drastic Dave” was making an impact and fighting back against the discounters. However, the retailer is far from out of the woods.
The Grocery Code Adjudicator, Christine Tacon, reported yesterday on the findings of an investigation which was itself triggered by the infamous accountancy scandal that is still the subject of an ongoing Serious Fraud Office probe.
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According to Tacon, the supermarket “knowingly delayed paying money to suppliers in order to improve its own financial position” in gross violation of the industry code of conduct.
The revelation comes as no surprise for suppliers as it served simply as confirmation of what many had known for a long time.
For the UK’s biggest retailer to have treated its supply chain with such contempt is frankly reprehensible. Payments due to suppliers were delayed in order to avoid missing targets that had been promised to investors. Peter was robbed to pay Paul.
Lewis is adamant that Tesco has moved a long way from the culture that dominated it during the period covered by Tucon’s report. But then, that’s what he said when the accountancy scandal was uncovered, too.
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The deterioration in the fortunes of this once unassailable retailer are made easier to understand when one reads Tacon’s findings. Incompetence (in the form of data input errors) combined with malignance (help lines were routed through Hindustan to handlers with no authority to resolve issues) to make life punishingly hard for suppliers.
If shareholders thought that their difficulties dissolved with the departure of Philip Clarke, they were mistaken. Indeed, up to 100 institutional investors have come together to launch legal action over the billions of pounds in value wiped off the company following the revelations of its £265m black hole.
Tesco faces a tough future, with pressure mounting from all directions.