Oct 23, 2014/Bloomberg

Tesco Plc (TSCO), the U.K.’s biggest supermarket company, said accounting irregularities that contributed to a slump in first-half profit pre-dated this year and that its chairman will leave.

The shares fell as much as 7 percent. Previous profit estimates were overstated by 263 million pounds ($422 million), the Cheshunt, England-based company said today. Tesco had said initially that an estimate of first-half profit was inflated by about 250 million pounds.

The misstatements “are a matter of profound regret,” according to Chairman Richard Broadbent, who said he will begin “to prepare the ground to ensure an orderly process for my own succession.”

The overstatements will impact second-half results as well, the company said, declining to give guidance on full-year profit performance because of “uncertainties.” New Chief Executive Officer Dave Lewis needs to redefine a brand whose popularity has faltered as more shoppers turn toward convenience and online, and shun the out-of-town supermarkets on which Tesco’s past growth was founded.

“We’ll set ourselves some very immediate priorities but our goal is very simple: We will put Tesco back into a place where it is a force for good for customers in the U.K. and indeed around the world,” Lewis said on a conference call.

Share Performance

Tesco shares fell as much as 12.75 pence to 170.25 pence and traded at 171.45 pence at 8:06 a.m. in London trading. The stock has slid 48 percent this year, last week falling to the lowest in about 11 years.

Tesco has suspended eight senior employees, including its U.K. chief, as the probe into the overstatement has widened.

Deloitte LLP has finished its investigation into Tesco’s figures and the results will be handed over to the Financial Conduct Authority, the company said today. The future of the suspended employees will depend on the result of the FCA probe. No one benefited financially from the overstatement, Tesco said today.

Profit Slump

Credit-rating providers including Standard & Poor’s and Moody’s Investors Service have said they may downgrade Tesco.

First-half trading profit slumped 41 percent to 937 million pounds, the company said today. Of the overstated profit, 118 million pounds related to the first half of this year, and the rest to prior periods.

U.K. sales at stores open at least a year fell 5.5 percent in the second quarter, excluding gasoline and value-added tax, said Tesco, whose market share is sliding, mostly at the expense of discounters Aldi and Lidl. The median estimate of 11 analysts compiled by Bloomberg was for a 6 percent decline. The U.K. trading margin narrowed to 2.3 percent of sales.

Tesco said in August that it would cut its interim dividend by 75 percent to 1.16 pence per share.