Tesco
Tesco Chairman Richard Broadbent Considers Stepping Down Amid Accounting InvestigationReuters

Retailer Tesco has reported a significant decline in sales and profit for the first half of 2014, adding to the woes of the firm.

Total sales for the first half declined 4.4% to £34bn ($54.7bn, €43.1bn) from the same period last year, as UK sales fell 2.6% to £23.6bn. Sales in Asia and Europe declined 8.4% to £5.1bn and 9.3% to £4.8bn, respectively.

UK like-for-like sales were down 4.6% due to strong competition across the grocery market, headwinds from price cuts and fewer untargeted promotions.

Statutory pre-tax profit fell 91.9% to £112m. After adjusting for exceptional items, underlying pre-tax profit fell 46.6% to £783m.

The disappointing results come as the company is suffering from an accounting error that led to the suspension of a number of top executives.

Tesco earlier said it overstated its profits by about £250m, leading to a plunge in its market value. It has also since suspended seven executives, including UK managing director Chris Bush.

Tesco has also launched an internal investigation, led by Big Four accountancy firm Deloitte while the Financial Conduct Authority (FCA) announced it is investigating the retailer.

The company said in its earnings release the Deloitte investigation into the validity of the figures has now concluded, and has confirmed that there was an overstatement in profit expectations by £263m.

The impact to trading profit is £118m in the first half of 2014 due to the mis-statement, with a further £70m relating to 2013/14 and £75m relating to pre-2013/14 treated as one-off items within these results.

Tesco added that it will pass the Deloitte Report to FCA and to other regulatory agencies.

"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," Tesco chairman Richard Broadbent said in a statement.

"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."

"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," CEO Dave Lewis said, commenting on the interim results.

"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."