Tesco’s chief executive has told a court of his “genuine shock” on learning of the £250m overstatement of the company’s profits.
Dave Lewis told Southwark Crown Court he had “no indication at all” of the issue until brought to his attention by the supermarket’s legal department.
He was giving evidence in the trial of former Tesco directors.
The men deny one count of fraud and another of false accounting, and are on bail.
Tesco’s shares tumbled by nearly 12%, wiping £2bn off the value of the company, when Britain’s biggest supermarket announced in September 2014 that the previous month it had overstated profits by about £250m.
Mr Lewis said his initial reaction to learning about the overstatement was “one of genuine shock, the level of what was implied in the paper was a way of operating I had not ever seen before”.
Holiday cut short
He said that a report from the legal department indicated Tesco had given “an inaccurate reading to the market”, and that his obligation was “to verify if it is true and update the market”.
He added: “It took certainly two readings – I understood some of the terminology but the point that was most striking was that in the first half of 2014 there had been potentially a misstatement in the results communicated to the market.”
Mr Lewis said former Tesco chairman Sir Richard Broadbent cut short his holiday in Italy when he was told what had happened.
Two days later, a team of auditors had verified that the report was accurate and the market was informed the following morning, he added. There was “an awful lot of financial pressure” on Tesco at the time, he told the jury.
Two former directors at the supermarket chain are standing on trial accused of fraud.
Chris Bush, ex-UK managing director, and John Scouler, the then-UK food commercial director, were allegedly aware that income was being wrongly included in the company’s financial records to meet targets and make Tesco look financially healthier than it was.
A third man, former UK finance director Carl Rogberg, is charged with identical offences but is not currently well enough to stand trial.
Scouler, 50, and Bush, 52, each deny one count of fraud and another of false accounting. They and Rogberg at the time had benefits packages with Tesco of more than £1m each.