business news in context, analysis with attitude

Reuters reports that Tesco is being sued by US investors who charge that the company and its former senior executives deliberately obfuscated its actual financial condition and issued and misleading financial statements. The company has disclosed that the early booking of revenue and delayed recognition of costs resulted in an overstatement of profit projections by more than $400 million (US), which has led to the stepping down of eight executives and the resignation of the company's chairman as both internal and governmental investigations proceed.

According to the story, the suit, brought by Irving Fireman's Relief and Retirement Fund "on behalf of purchasers of Tesco's American depository shares from Feb. 2 to Sept. 22, was brought in federal court and is seeking class action status.

Tesco has not commented on the suit.
KC's View:
There was a series of pieces in the British press over the weekend that seem to be prompted by Tesco and calculated to get UK citizens to identify with Tesco's new CEO, Dave Lewis, at some level. The stories make the point that Tesco is only the second place that Lewis has ever worked - he has spent his entire career to this point at Unilever - but that he's had no second thoughts about taking the job, even though it has forced him to work nonstop and was unable to even take his daughter to college. The stories make the point that Lewis is trying to break down the bureaucracies that seem to have built up over time, and make Tesco a customer-centric organization again: "What I’m really trying to do at this point is to try to get everyone to look through the eyes of the customer again. I’m trying to get the business to make time for things that matter from a customer point of view: service, availability, quality – all those things that the customer can actually see."

It is an interesting approach, and could move the needle a bit … because Lewis has the advantage of being an outsider who can serve as a surrogate for the British consumer. But I'm not sure it will actually work, simply because the problems being experienced by Tesco go far beyond the financial scandal and extend to its ability to compete in a market where discounters have changed the traditional rules of the game while mainstream retailers seemed not to be paying attention.