Tesco profits plummet, chairman announces resignation

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Pretax profits at U.K. supermarket giant Tesco fell by 91.9 percent to £112 million ($180 million) in the first half of 2014, and Chairman Richard Broadbent announced his resignation.

Thursday's earnings statement confirmed that Tesco had overstated profit figures for the first half of 2014 by £263 million—more than the £250 million originally estimated.


The company has been forced to scrap its full-year outlook because of "uncertainties" over its future performance. Its share price tumbled by 6 percent in early London trading following the news.

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Broadbent said he will start looking for his successor, after he became the focus for investor discontent.

"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," he said in a statement.

Tesco profits crash as overstatement worsens
Tesco profits crash as overstatement worsens   

Eight senior Tesco executives have been suspended over allegations that U.K. profits were overstated earlier this year. There could be further bad news for the supermarket, as Deloitte has found "there have been similar practices in prior reporting periods."

The black hole was discovered in its accounts last month, when a whistleblower approached the new chief executive.

Analysts at Shore Capital wrote in a research note: "We can never recall a period so damaging to the reputation of the company."

Phil Clarke and Laurie McIlwee, Tesco's chief executive and finance director respectively at the time of the profit overstatement, will not receive some of the payments due to them when they left the business, until the accounting inquiry concludes.

The new CEO, Dave Lewis, who has just came from Unilever, has been joined by new chief financial officer Alan Stewart. He is now "reviewing all aspects of the group."

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Lewis said in a statement: "Whilst my review of the whole business continues, three immediate priorities are clear: to recover our competitiveness in the UK, to protect and strengthen our balance sheet and to begin the long journey back to building trust and transparency into our business and brand."

The supermarket, which once dominated the U.K. retail landscape, now faces an uncertain future. Many of the suspended executives were long-serving Tesco employees, which has raised questions about the company's culture.

It is facing increased competition on price from discounters Aldi and Lidl, and failing to capture consumers at the higher end of the market.

One option for the company may be to explore the selloff or separate some of its overseas operations. The company has a significant presence elsewhere in Europe and in Asia.