by Ron Wain, Joint Managing Director, Deep South Media
Prescient words, for sure.
Mike Dennis, an analyst at investment bank Cantor Fitzgerald, pulled no punches in his report on beleaguered grocer Tesco back in June.
Explaining how the retailer was losing market share to discount rivals and the luxury end, he wrote: “”It seems Tesco is stuck in the middle and investors could be questioning management’s strategy.”
Now, four months on, Uncle Tom Cobley and all is questioning that strategy after it emerged that Britain’s largest supermarket overstated forecast profits by a staggering £250m.
In short, this FTSE mainstay, profit warnings ringing in its boardroom ears, has apparently tried to recognise revenue too early on. A bit like counting your chickens before they’ve hatched.
Hence the accounting scandal which has gripped the mainstream media as well as the financial press.
After all, it is not everyday four senior executives of such a large company are asked to stand aside pending an investigation.
Meanwhile, Tesco staff across the country having to put up with quips from paying customers: “I’d better check my receipt to make sure the figures add up.”
Few people without a financial interest in Tesco will shed tears for a giant which made a group trading annual profit of £3.3bn, even if there was a 6% fall.
Or that the share price, at £4.88 back in October 2007, dipped below £1.93 at one point this September.
However, for the corporate affairs communications team at Tesco, the company’s fall from stock market grace will be challenging in every aspect.
Something rotten is smelt by the media and, in this fevered climate, new twists and turns should be anticipated in the same way that the embattled Co-op discovered when the blinding spotlight was turned on its own corporate affairs.
The advisors at Tesco will need to deliver clear, unambiguous messages that address problems head-on, however uncomfortable the reading may be.
A start has been made with a trading statement on September 22nd, which included this quote from Dave Lewis, Group Chief Executive Officer: “We have uncovered a serious issue and have responded accordingly.
“The Chairman and I have acted quickly to establish a comprehensive independent investigation. The Board, my colleagues, our customers and I expect Tesco to operate with integrity and transparency and we will take decisive action as the results of the investigation become clear.”
Integrity and transparency – the cornerstones of any well-run business.
Not to deliver on these fundamentals would play into the hands of a media that rightly turns stones over to see what lays underneath in the dark.
Or, in this case, picks up goods from the supermarket shelves to see if the consumer – us, the public – has been sold something long past its sell-by date.
