Another day, another calamity at Tesco

Every Little Helps. Tesco's long-standing tagline is one of the most recognised in advertising. But as chief executive Dave Lewis assesses the impact of the latest blow to the grocer's reputation, he must wonder just what might help him in his efforts to restore the retail giant's increasingly tarnished image.

Lewis already knew the company was in a sorry state. Three profit warnings under his deposed predecessor Philip Clarke were a clear indication the company has lost much of its sheen. And the almost indecent haste in which he was parachuted into the post made it clear he was expected to deliver quickly on his reputation for restructuring.

But all that pales beside this latest calamity. Just a week ahead of the scheduled publication of interim results the company has discovered a £250 million overstatement of profit in the figures.

To put this in context, even after the recent profit warnings Tesco was expected to deliver operating profits of around £1.1 billion for the first half of its trading year. That figure is now reduced by 23 per cent.

And the figure itself is not the worst of it. Far more pressing for Lewis, and Tesco, is to be able to explain how it happened. In a statement the company said: “Tesco has identified an overstatement of its expected profit for the half year, principally due to the accelerated recognition of commercial income and delayed accrual of costs.”

Effectively, the company has been booking revenue that has not yet been earned and not recognising costs that have been incurred under standard accounting practices. When Lewis does brief the market next month, three weeks after he had been due to, analysts and investors will expect to know exactly how the hole in the accounts occurred.

More importantly they will want reassurance that no further bad news lies ahead in those accounts. Rebuilding the business is challenge enough: not knowing the scale of the problem will only exacerbate Tesco’s problems further.