TESCO will reveal a steep fall in half-year profits next week in the wake of a catalogue of disasters including a £250 million accounting error that has seen eight of its executives suspended.
Britain’s biggest supermarket is also due to provide an update on its probe into the blunder when it delivers interim results on Thursday.
The publication of the figures was put back by three weeks after the group admitted last month it had overstated its expectations of earnings for the period by £250 million.
It resulted in the third profits warning in as many months for the beleaguered group and a fresh headache for new chief executive Dave Lewis just weeks after he took over from Philip Clarke at the start of September.
Shares have fallen by nearly 30% since the end of August and are worth half as much as a year ago.
Mr Lewis was drafted in from Unilever after Tesco’s worst trading performance in four decades - a first quarter like-for-like sales decline of 3.7% - sparked his predecessor’s departure.
Latest industry data from Kantar Worldpanel has indicated further gloom, with total sales falling 4.5% in the 12 weeks to September 14 and market share, which last year was more than 30%, shrinking to 28.8%.
The group is caught up in a supermarket price war as the major grocers battle the threat from discounters Aldi and Lidl.
It has now admitted that issues uncovered in its UK food business would mean that its previous prediction of half-year trading profits in the region of £1.1 billion looked likely to have been overstated by £250 million.
The warning suggests a figure of around £850 million, representing a 46% fall on earnings of £1.59 billion for the same period last year.
Tesco ordered a review to be carried out by Deloitte together with external legal advisers Freshfields.
The inquiry is looking in to the way company treated rebates paid by suppliers and whether they were reported in the right time period. The Financial Conduct Authority is also investigating.
Tesco has so far asked eight executives including UK managing director Chris Bush to step aside.
Shore Capital analyst Clive Black said the group had suffered a “catalogue of disasters” and “faces considerable challenges”.
Mr Lewis has endured a bumpy ride since starting as chief executive on September 1, a month earlier than planned and just days after Tesco announced it was cutting its dividend by 75% and slashing spending on store refits by £400 million a year.
Chairman Sir Richard Broadbent said the move would shore up the group’s financial position and give it “strategic optionality”. Cantor Fitzgerald analysts said it could give Tesco a £1.3 billion war chest to face down rivals in the price war.
Sir Richard has come under pressure over the supermarket’s troubles but has said he has no intention of stepping down and plans “to be part of the solution”.
The group’s damaged reputation was hardly helped when it emerged recently that it was to take delivery of the latest of its fleet of private jets - though it is now dispensing with them.
Mr Lewis is aiming to reconnect its 4,000 head office and corporate staff with the needs of customers with a scheme that will see them all spend at least one day a fortnight working in a Tesco store, in the run-up to Christmas.
These will include the chief executive himself as well as new finance director Alan Stewart, poached from Marks & Spencer, at a time when the group’s financial arrangements will be under detailed scrutiny by Deloitte and the City regulator.
Cantor’s Mike Dennis said the forensic investigation - which could see laptops handed over by commercial personnel and supplier meetings postponed - might disrupt the business and “create operational paralysis” in the pre-Christmas period.
Meanwhile analysts have welcomed the decision to beef up Tesco’s board with the appointment of Richard Cousins, chief executive of catering giant Compass, and former Ikea boss Mikael Ohlsson.
On the markets, big-name investors have taken differing views about its prospects.
Newcastle United owner Mike Ashley’s Sports Direct has placed a £43 million bet - representing a 0.3% slice of the group - on its recovery.
But billionaire Warren Buffett has described his investment in Tesco as a mistake and reduced his stake, previously around 5%, to below 3%.