Tesco Chairman Richard Broadbent Steps Down: Where Did the Brand Go Wrong?
The situation has gone from bad to worse for Tesco Plc, and that situation was awfully bad to begin with. In September, it was revealed that the massive UK-based retail brand had overstated its half-year expected profits to the tune of £250 million, prompting incoming CEO Dave Lewis to launch a full investigation and suspend four high-ranking officials in the process.
By now eight executives have been suspended over the course of that investigation, and this Thursday came with the news that those accounting misstatements started well before this year’s half-year report, a bombshell that has led Tesco Chairman Richard Broadbent to officially step down.
According to Reuters UK, this has sent Tesco further into a tailspin leaving Lewis to pick up the pieces and confess to shareholders that things are going to be pretty rocky and up in the air for a while before they start to get better:
Broadbent told reporters that it was important to draw a line under what happened in the past, perhaps suggesting that by stepping down after three years as chairman he’s allowing shareholders to observe a line between the old management and the new and move forward more confidently. Meanwhile, Broadbent himself is bearing a lot of criticism for allowing Tesco to get to this low point.
And where exactly did Tesco go wrong anyway? According to Reuters, shareholders speculate that it started when the retail brand started putting a bigger emphasis on growth overseas rather than working on supporting business growth domestically. Those overseas efforts have not all been met with the same degree of success (hello, United States and Tesco’s Fresh & Easy misstep), and meanwhile changing consumer habits on the homefront are causing shoppers to drift toward different formats like Aldi or Waitrose. All of these issues have been building up toward falling profits and massive frustration from shareholders:
These issues were also no doubt catalysts toward the inclination for Tesco execs to cook the books in order to paint a more positive financial outlook picture. Now they are where they are – still in a freefall of finance and image, considering asset sales and spinoffs to raise the money needed to get back on its feet, and likely to face more troubles before new leadership is able to fully come together and set the brand back on a stronger and more legitimate path.
[SOURCE: Reuters UK]