Tesco’s (LON:TSCO) accounting black hole may be much larger than previously thought, according to new research by US broker JP Morgan.
The supermarket giant has been in turmoil since September when it revealed a £250mln shortfall in its interim profits, which subsequently rose to £268mln.
Eight senior executives were suspended while the Serious Fraud Office launched its own inquiry.
Digging by JPM into Tesco’s filed accounts, however, has suggested the actual number may be higher still.
According to the broker, £319mln is the discrepancy between the published numbers and the accounts of its individual subsidiaries.
“The difference of £319mn in 2013/14 includes £145mln of the profit overstatement announced by the company (of which £70mln related to 2013/14 and £75mn related to prior years).
“However, this still leaves a gap of £174mln, which compares with an average gap of £28mln in the previous seven years.”
JP Morgan said it had quizzed Tesco about its findings and was told that the difference might be explained by differing accounting treatments of the numbers.
JPM also noted that the rental cost for Tesco in the UK continues to rise at a fast pace and was around £1bn last year from £900mln a year earlier.
The implied asset life of its non-property fixed assets also continues to be extended, said JPM, which has implications for profits through the depreciation charge.
Tesco shares have slumped in the wake of its problems and fell again a week ago as new chief executive Dave Lewis issued another profit warning, blaming a tough grocery market for cutting full year expectations to £1.4bn.
Still by far the market leader, Tesco has struggled to deal with the growing threat of no-frills rivals Aldi and Lidl at the bottom of the market and Waitrose at the top end.
Lewis is ploughing money into staff training, increased availability of key product lines and reduced prices to stabilise its position.
Shares today were 0.5% lower at 166.6p. JP Morgan has an underweight stance on the shares with a 145p target price.