Tesco executives suspended after profit estimate overstated

Shares of British supermarket chain Tesco Plc dropped to their lowest point in more than 10 years after the company grossly overstated its first-half operating profit projection.

The projection was overstated by roughly 250 million pounds (approximately CAD$450 million); it estimated its first-half operating profit would be 1.1 billion pounds.

The company has suspended four executives, including U.K. chief Chris Bush, and is conducting an investigation of accounting procedures.

Neil Saunders, an analyst at Conlumino in London, told Bloomberg Businessweek that while mistakes happen, this blunder gives the impression that the company isn't in total control of its internal procedures. "More significantly, it means that performance--which is already extremely weak--is actually much weaker than anticipated."

Tesco is said to have been losing customers recently to discounters such as Aldi and Lidl.

After the inflated estimate was released and Tesco explained some income was booked prior to being earned and costs were accounted for later than incurred, shares dropped as much as 12 per cent.

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