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Tesco Admits Accounting Irregularities, Chairman Steps Down

Tesco announced Thursday that its chairman Sir Richard Broadbent would step down from his position after the company disclosed it had overstated profits by about $423 million last month. The UK superstore also said its accounting irregularities date back two years, and revealed that $190 million of the shortfall related the first half of the year and the remainder $232 million is tied to the past two years.

Company chairman Sir Richard Broadbent said, “The issues that have come to light over recent weeks are a matter of profound regret. We have acted quickly to clarify the financial performance of the company. A new management team is in place to address the root causes of the mis-statement and to develop and implement the actions that will build the company’s future. I am confident that the new chief executive and chief financial officer will move rapidly and effectively in this respect.”

Once the transition is complete and business plans are in place, Broadbent said it would mark the beginning of a new phase for Tesco. He added, “My decision reflects the important principle of accountability on behalf of the Board and will support the company to draw a line under the past as it enters the next phase of its development.”

Chief executive Dave Lewis named three immediate priorities for the company: restoring competitiveness in its core U.K. business, protecting and strengthening its balance sheet and to begin the long journey of rebuilding trust and transparency in the business and the brand.

Lewis said, “Our business is operating in challenging times. Trading conditions are tough and our underlying profitability is under pressure. We do however face these challenges from a position of market strength and I have been heartened by the team’s welcome and their determination to stay focused on doing the very best for our customers.”

Due to the number of uncertainties in its accounting books, Tesco said it is unable to provide a full year profit guidance. It will update its third quarter performance on Jan. 8, 2015.