Tesco (LON:TSCO) loses its profit due to flaws in accounting

This year has not been a very good one for Tesco (LON:TSCO). It was revealed by the supermarket Titan of the United Kingdom, that the profit they disclosed in the first part of the year was overstated. There as a gigantic gap of $408 million (£250 million) between the actual value and the value that was disclosed. The company declared in August that they made a trading profit as big as £1.1 billion. However, interestingly enough this handsome profit figure was cut by a quarter. In London the value of the company shares has declined by about 7%.

The company was forced to summon the accountants from Deloitte who were to look though the huge amount of shortfall, during which the price of their shares took another nosedive by 8%.

At Accendo Markets, Marc Kimsey offered his view on the topic through a note that stated that the time is past when Tesco (LON:TSCO) was a worthwhile investment. The funds are being relocated and the books are being cleared of all its holding at every broker. They further stated that the perseverance and diligence of all the investors had been greatly tested in the last couple of years but the fact that was revealed today and the dividend that was cut back leaves no room for any kind of justification to hold on to their stock.

This was not all; there are various analysts at the Cantor Fitzgerald who were of the view that even a larger drop was expected. It was anticipated that an amount that was estimated to be £300 million would mean that the earnings will fall to a level that would be lessened by 55% not including the VAT. The revenues were £63.557 million in 2013-2014 but these are now reduced a great deal.

In his note for his clients, Cantor’s Mike Dennis has stated that the news circulating in the market is that now Tesco (LON:TSCO) has to sell its asset across the United Kingdom if they ever intend to make up for this behavior.

Lucky for Tesco (LON:TSCO) the new CEO who took over control of the company is someone who stands firm in the face of tough decisions. With a nick name of “Drastic” Dave Lewis, he has succeeded in making sure that the company is able to cut down its cost by 40% and to achieve this he laid off as many as 300 workers. Tesco (LON:TSCO) has the title of being the second biggest employment provider in the United Kingdom and if it goes out of business, there would be massive repercussions all over the country. If half a million people get unemployed suddenly, the country has a huge impact on its economy.

Lewis said this Monday that having discovered a serious mishap, he is making sure that it is treated with the utmost transparency and fixed as appropriate. Tesco’s (LON:TSCO) market share has been dropping for the last 20 years and this potentially can be the last straw.