Tesco CFO Stewart Starts Early as Accounting Inquest Begins

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Tesco Plc (TSCO) said Alan Stewart will start today as chief financial officer after gaining his early release from Marks & Spencer Group Plc (MKS) as the biggest U.K. grocer handles the fallout from overstating its profit guidance.

Stewart is taking up the post more than two months ahead of his scheduled Dec. 1 start date, the Cheshunt, England-based retailer said in a statement today. The former WH Smith Plc finance chief has been on an enforced period of leave from Marks & Spencer since resigning in July to join Tesco.

“His first task this morning will obviously be to look at Tesco’s accounting practices, but they will need to move on fairly quickly to devise a new strategy to revive the business,” said Bruno Monteyne, an analyst at Sanford C. Bernstein. “The accounts will need to be cleaned up and they will be cleaned up, I have no doubt in my mind about that.”

Tesco yesterday said it had suspended four executives after discovering that profit estimates had been overstated by 250 million pounds ($409 million) for the first half of the year. The company’s problems have been compounded by the lack of a finance director — the previous chief,Laurie McIlwee, had announced his resignation in April and hadn’t been seen in the office for weeks, Chairman Richard Broadbent said yesterday.

Tesco fell as much as 3.3 percent to 196.35 pence in London trading, after yesterday sliding to the lowest since 2003. The stock was down 2.5 percent at 9:35 a.m.

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Figures today from researcher Kantar Worldpanel showed Tesco continuing to lose sales and market share, mostly at the expense of discounters Aldi and Lidl. Market share declined to 28.8 percent in the 12 weeks ended Sept. 14 from 30.2 percent a year earlier, Kantar said. Revenue fell 4.5 percent.

Marks & Spencer confirmed Stewart’s departure, saying he will receive no remuneration payments in lieu of notice.

The new finance chief joins as Tesco investigates how the overstatement occurred. The company yesterday said outside auditors will start an independent review of the inflation, which was linked to some income being booked before being earned while certain costs were recognized later than incurred.

Stewart will receive a basic annual salary of 750,000 pounds and standard benefits, Tesco said in July. That’s 30 percent more than the 579,000 pounds in basic pay he earned at M&S. He will be granted replacement share awards worth 1.74 million pounds in lieu of deferred M&S awards that he will forfeit, the grocer said at the time.

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