Clothes and other inventory held on the fashion group’s balance sheet as of 26 January last year was overstated by £58mln, accountants at Deloitte have calculated, compared to the company’s initial assessment of £20-25mln.
The overstatement was first made public in December after being identified by new chief financial officer Rachel Osborne, who has since been promoted to interim chief executive.
She replaced Lindsay Page, the longtime finance chief who had been in charge of the accounts during the time when the misstatement had been made, who was promoted to CEO when founder Ray Kelvin was forced out in the wake of the “forced hugging” scandal.
Page and chairman David Bernstein, who has been at the company since 2003 and chairman since 2013, were both let go last month as the company suspended payment of its dividend and warned that profits could fall 90% for the year.
Laywers from Freshfields Bruckhaus Deringer have also been appointed to carry out a review of the circumstances around the misstatement of the inventory levels, with analysts expecting this to be completed by the time of the preliminary results are due in late March.
Shares at 11-year low
TED shares tumbled 7% to below 290p on Wednesday morning for the first time since 2008.
Analysts at Liberum said Wednesday's statement "is light on information as to how this error arose and we await the conclusion of a further review".
At broker Peel Hunt there were worries about "whether a process/systems error or a more fundamental or judgement issue with stock provisioning...Our concern is focused on the reason for the error".
Ahead of the release of results, Peel Hunt suggested the company "needs to reset banking covenants, which is likely to be in process currently", with potential balance sheet relief to come from a sale and leaseback of the head office development.