Tesco dodgy dealings?

Author
Discussion

s2kjock

1,678 posts

146 months

Monday 22nd September 2014
quotequote all
sugerbear said:
So a fine for PcW then back to business as normal. Excellent.
Only if they have incorrectly audited the figures announced.

Hackney

6,811 posts

207 months

Monday 22nd September 2014
quotequote all
Digga said:
oyster said:
Digga said:
Bree said:
Clarke going early without any protest makes a whole lot more sense now.
The sad fact is, corporate parasites of his ilk nearly always seem to be able to worm their way into an almost similarly lucrative role, every time.
He's a Tesco lifer - in what way is he a corporate parasite who flips from one lucrative role to another as you're alluding?
What part of the phrase "of his ilk" do you not understand?

There has been a litany of serial executive under-performers who miraculously go from one mediocre performance to another.
I think you need to check your definition. You say "corporate parasites of his ilk", which means people like Philip Clark are corporate parasites.
In reality (and as pointed out by oyster) Clarke is not one of those "corporate parasites" as he's worked for Tesco all his life and worked his way up. As of today he hasn't "miraculously" gone into another company.

Philip Clarke doesn't fit the your definition of people "of his ilk"!


Art0ir

9,401 posts

169 months

Monday 22nd September 2014
quotequote all
Good summary from BI this morning;

According to the Daily Mail’s Simon Neville, “Tesco's Dave Lewis says he has never seen anything like this in all his years as a supplier.”

Four senior executives have now been suspended: Radio Five Live’s Adam Parsons says that UK managing director Chris Bush is among them. Lewis wouldn't identify suspended execs, but he confirmed that multichannel director Robin Terrell is now doing Bush’s job.

The Guardian now says it has identified the other suspended executives, naming UK finance director Carl Rogberg, UK commercial food director John Scouler and Matt Simister, food sourcing director.

Tesco chairman Richard Broadbent won’t answer as to when Laurie McIlwee, Tesco’s current finance director, was last in the office.

The supermarket has alerted the Financial Conduct Authority, the UK's major finance watchdog, about the huge disparities.

Broadbent also reportedly said that the company couldn't be sure the £250 million profit overstatement is the full extent of the meltdown.

The chairman has now put himself in the firing line, telling reporters that shareholders "will have to decide whether I am part of the problem or part of the solution," according to the Telegraph.

There's a whistleblower involved, according to the Financial Times' coverage: "Mr Lewis told analysts that the investigation had been triggered by a whistleblower within Tesco, stating that 'an individual alarm bell' had gone off."

There's no suggestion that Lewis has had any involvement in the issue. He only took up his post three weeks ago, taking over from Phillip Clarke, who felt "enormous relief" to be on his way out. Lewis might now have some questions for him.

It's not yet totally clear how the absurd inflation of profits came about. Tesco says that there was an "accelerated recognition of commercial income and delayed accrual of costs," suggesting that earnings that should not have been included in the first half of the year's results were, and costs that should have been included were left out.

Lewis is insisting that his turnaround operation is still ongoing and that this isn't going to stall that. But Rebecca O'Keeffe at Interactive Investor says in a note that investors placing their hope in a reversal of fortunes "will be utterly despondent at the news."

Nothing Lewis or Broadbent said has reassured the markets about Tesco's financial strength. At the time of writing, shares are down 8.82% on Friday's close, adding to an already poor year.

Lewis has been in retail with Unilever and Tesco for nearly three decades, so the fact that he has never seen such an issue is a brutal indictment, confirming that this isn't some sort of run-of-the-mill mistake.

The refusal by Broadbent and Lewis to say the £250 million is the final extent of the problem could also give some backing to analysts at Cantor Fitzgerald, who said that they think the overstatement might be closer to £300 million.

With more than half a million employees at Tesco, and a new chief executive with a reputation for aggressive cost-cutting, we may be seeing more grim updates from the massive retailer in the near future.


ralphrj

3,508 posts

190 months

Monday 22nd September 2014
quotequote all
essayer said:
Ironic that it is payments *from* suppliers that have caused this.

Suppliers paying Tesco for the privilege of having their products in their stores..
Suppliers give a discount to the retailer in the form of an up front cash payment. Retailer should release discount to P&L over the course of the contract but instead takes it all in one hit.

Exactly the same thing that nearly sent Wickes under 18 years ago.

Justin Cyder

12,624 posts

148 months

Monday 22nd September 2014
quotequote all
How do you delay accrual of costs? You don't pay anyone, that's how. Anecdotally, a raft of my customers who supply Tesco are telling me things are the worst they've ever been in respect of getting money out of them.

Soov535

35,829 posts

270 months

Monday 22nd September 2014
quotequote all
ralphrj said:
essayer said:
Ironic that it is payments *from* suppliers that have caused this.

Suppliers paying Tesco for the privilege of having their products in their stores..
Suppliers give a discount to the retailer in the form of an up front cash payment. Retailer should release discount to P&L over the course of the contract but instead takes it all in one hit.

Exactly the same thing that nearly sent Wickes under 18 years ago.
FFS.

Idiots.

lauda

3,446 posts

206 months

Monday 22nd September 2014
quotequote all
Justin Cyder said:
How do you delay accrual of costs? You don't pay anyone, that's how. Anecdotally, a raft of my customers who supply Tesco are telling me things are the worst they've ever been in respect of getting money out of them.
It's called working capital management. Trust me, Tesco aren't the only business that do this.

Justin Cyder

12,624 posts

148 months

Monday 22nd September 2014
quotequote all
lauda said:
It's called working capital management. Trust me, Tesco aren't the only business that do this.
I trust you. I'm managing one of my own who's well over 100 days at the moment. Call it what you like, it stinks that this culture is so endemic & when a corporate bellwether are at it, little guys like me have no chance.

lauda

3,446 posts

206 months

Monday 22nd September 2014
quotequote all
Justin Cyder said:
I trust you. I'm managing one of my own who's well over 100 days at the moment. Call it what you like, it stinks that this culture is so endemic & when a corporate bellwether are at it, little guys like me have no chance.
I agree with you. It's the big boys flexing their muscle and being in a position to do it with impunity. But it's been a tactic which has worked for Tesco in the past (let's not forget, they could do no wrong five years ago) and where the big companies lead, and suceed, others tend to end up following.

Durruti

1,020 posts

237 months

Monday 22nd September 2014
quotequote all
And exactly at which point does working capital management become trading insolvently?

over_the_hill

3,185 posts

245 months

Monday 22nd September 2014
quotequote all
Justin Cyder said:
How do you delay accrual of costs? You don't pay anyone, that's how. Anecdotally, a raft of my customers who supply Tesco are telling me things are the worst they've ever been in respect of getting money out of them.
As noted in a few posts above you delay payment as long as possible - hoping a few of your creditors go under in the meantime. Then you do not pay or pay a greatly reduced amount.

lauda

3,446 posts

206 months

Monday 22nd September 2014
quotequote all
Durruti said:
And exactly at which point does working capital management become trading insolvently?
In the case of Tesco, it's nowhere near that sort of situation. Cash and cash equivalents on their last balance sheet were £2.5bn.

They're just making their capital work for them in the most efficient manner; they're neither over-trading nor trading when insolvent. Whether you think screwing your suppliers on payment terms is a good thing is another issue but shoppers and investors used to love Tesco when it was doing all these things and working in their favour.

lauda

3,446 posts

206 months

Monday 22nd September 2014
quotequote all
over_the_hill said:
As noted in a few posts above you delay payment as long as possible - hoping a few of your creditors go under in the meantime. Then you do not pay or pay a greatly reduced amount.
I honestly don't think Tesco are interested in putting their suppliers out of business. Supply chain management is a major headache for large retailers and having constant churn as they go under isn't going to help that. They do it to all of their suppliers.

I had a conversation with a senior individual at an alcoholic drinks manufacturer a while ago about some of Tesco's practices. They apply the same principles dealing with the big guys as they do the little ones and they like to squeeze them until the pips squeek but they don't want to put them out of business.

Durruti

1,020 posts

237 months

Monday 22nd September 2014
quotequote all
I fully accept your point about Tesco - my comment was pointed more at lauda's reply to Justin.

It annoys me immensely when corporate bullst bingo phrases such as "working capital management" filter down through the layers to small businesses and in reality translate to "we're trading with your money mate 'cos we ain't got none, innit."

If the Tesco case follows the Wickes precedent, no-one will do time and the auditor might have to bung a few quid away in fines.....business as usual and trebles all round.......

lauda

3,446 posts

206 months

Monday 22nd September 2014
quotequote all
Durruti said:
It annoys me immensely when corporate bullst bingo phrases such as "working capital management" filter down through the layers to small businesses and in reality translate to "we're trading with your money mate 'cos we ain't got none, innit."
It's far from bullst bingo, it's 'How to Run a Business 101'. If you don't manage working capital properly, you'll be under before you know it. In fact, it's probably the single biggest reason that otherwise viable businesses fail.

Some businesses are very good at it, some very bad and some take the piss. Where you place Tesco on the scale probably depends on whether you're an investor, supplier or customer.

crankedup

25,764 posts

242 months

Monday 22nd September 2014
quotequote all
over_the_hill said:
onyx39 said:
http://www.bbc.co.uk/news/business-29306444

Heard on the news that they had overstated profits by hundreds of millions, and now the MD and three other senior execs have been asked to "step aside"
They will be more of those 'highly talented' senior manager types that the country can't function without rolleyes

No doubt their bonuses and high salaries were profit related but I just can't get my head around why they would try and bump up the figures.

Tesco said:
principally due to the accelerated recognition of commercial income and delayed accrual of costs
So they massively overguessed their income and a few bills finally caught up with them.
As a 'basher' (apparently) of Corporate giants I couldn't agree more with your POV. Lots of 'clever' people at the top have had an easy ride during the past few decades when it has been difficult not to make profit and grow. Now it tough on the high street, time for those 'clever' people to shine, or not.

Digga

40,207 posts

282 months

Monday 22nd September 2014
quotequote all
Hackney said:
Philip Clarke doesn't fit the your definition of people "of his ilk"!
Art0ir said:
There's no suggestion that Lewis has had any involvement in the issue. He only took up his post three weeks ago, taking over from Phillip Clarke, who felt "enormous relief" to be on his way out. Lewis might now have some questions for him.
crankedup said:
As a 'basher' (apparently) of Corporate giants I couldn't agree more with your POV. Lots of 'clever' people at the top have had an easy ride during the past few decades when it has been difficult not to make profit and grow. Now it tough on the high street, time for those 'clever' people to shine, or not.
Nail, head.

Durruti

1,020 posts

237 months

Monday 22nd September 2014
quotequote all
lauda said:
It's far from bullst bingo, it's 'How to Run a Business 101'. If you don't manage working capital properly, you'll be under before you know it. In fact, it's probably the single biggest reason that otherwise viable businesses fail.

Some businesses are very good at it, some very bad and some take the piss. Where you place Tesco on the scale probably depends on whether you're an investor, supplier or customer.
And in pre- history it was called cashflow...... It really isn't a recent concept. That aside, for all the talk about supply chain this and management that, it's really edifying to see senior execs in such a blue chip business behaving exactly like the dodgy guy in sales, wildly manipulating figures because the naked fear of having to be accountable for not hitting targets is obviously greater than the fear of being caught manipulating the books. Funny old game.

alfaman

6,416 posts

233 months

Monday 22nd September 2014
quotequote all
Justin Cyder said:
How do you delay accrual of costs? You don't pay anyone, that's how. Anecdotally, a raft of my customers who supply Tesco are telling me things are the worst they've ever been in respect of getting money out of them.
Paying suppliers late does not inflate your profit. As the cost should be accrued to match the revenue.

However - if the costs are NOT accrued - then that would overstate earnings.

I wonder if they have been : 1/ deliberately or inadvertently bringing forward the accrual ofsupplier retro rebates (to Tesco). While (deliberately ?) under stating or under accruing trading costs.

Will be interesting to find whether this is a genuine revenue forecast error as cause , or accounting policy mistake or deliberate fudging of accounting policy / forecast methodology.

Ironically a few years back I worked alongside the guy who until very recently was the UK FD for Tesco. He suddenly left earlier this year. Was that the time these issues were fermenting? scratchchin


lauda

3,446 posts

206 months

Monday 22nd September 2014
quotequote all
Durruti said:
And in pre- history it was called cashflow...... It really isn't a recent concept. That aside, for all the talk about supply chain this and management that, it's really edifying to see senior execs in such a blue chip business behaving exactly like the dodgy guy in sales, wildly manipulating figures because the naked fear of having to be accountable for not hitting targets is obviously greater than the fear of being caught manipulating the books. Funny old game.
And doesn't that tell us something about the perverse nature of modern capital markets? Tesco is having a tough time of it at the moment (having been the darling of British retail for the last 20 years) and it's senior management seems to have been caught with their pants down desparately trying to appease the markets.

If you go to any Tesco branch on any day of the week, it's pretty clear the company is not exactly on its knees and yet the market reaction to recent performance (and don't forget it's still Britain's biggest supermarket) would have you believe that it's on the brink of disaster.

And if the banking crisis showed us anything, it's that you probably can't trust anyone in modern commerce.