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[LONDON] The chairman of Britain's biggest retailer Tesco will resign after the supermarket group was found to have overstated profits by £263 million (US$422 million, 334 million euros), it announced on Thursday.
"The board's immediate focus must be on ensuring that we complete the transition to a new management team and that new and far-reaching business plans are put in place quickly," chairman Richard Broadbent said in a statement that also revealed Tesco's net profit had slumped to just £6.0 million in its first half from £820 million one year earlier.
Tesco, the world's third biggest supermarket group, stunned investors one month ago when it revealed that its profit for the six months to August 23 was overstated by an estimated £250 million.
Following an independent review by accountants Deloitte, the final figure was put at £263 million, which includes overstatements of £70 million for Tesco's last financial year and £75 million relating to pre-2013/14.
"The issues that have come to light over recent weeks are a matter of profound regret," Broadbent added in the statement.
Tesco has suspended eight executives since recently-appointed chief executive Dave Lewis launched an inquiry into the accounting error that has triggered a separate probe by British regulator the Financial Conduct Authority.
Tesco's shock profits warning last month also sent its share price sliding and caused US billionaire investor Warren Buffett's investment company to cut its holdings in the group.
Buffett, nick-named the "Sage of Omaha" for his successful track record in investments, admitted to CNBC early this month that his investments in Tesco had been a "huge mistake".
While Tesco has been forced to massively adjust its reported earnings owing to an overstatement of income and an understatement of costs, the supermarket has in any case seen profits hit in recent times by increased competition in main market Britain.
In a bid to turn around its fortunes, the group in July appointed outsider and Unilever executive Lewis to replace long-standing chief executive Philip Clarke.
"Our business is operating in challenging times," Lewis said in Thursday's statement.
"Trading conditions are tough and our underlying profitability is under pressure. We do however face these challenges from a position of market strength." Lewis' predecessor oversaw Tesco's first profits warning in 20 years back in 2012 that sparked a £1.0-billion turnaround plan to refresh its supermarket stores, but the group revealed in April that annual profits fell for the second year in a row.
Tesco has struggled in recent years in Britain, as recession-weary shoppers have turned to German-owned discount retail groups Aldi and Lidl.
Discount chains boomed during the downturn as consumers tightened their belts to save cash, and remain popular despite the economy's steady recovery this year.
Tesco's profits have been weighed down also by fierce competition from its traditional supermarket rivals comprising Wal-Mart division Asda, Sainsbury's and Morrisons.
Britain's biggest retailer has also suffered abroad in recent times, causing it close its failed US division Fresh & Easy and to exit from Japan over the past couple of years.
Tesco is the world's third-biggest supermarket group after France's Carrefour and global leader, US retailer Wal-Mart.