Tesco'S Brand Disappears Into A Foregone Conclusion Financial Fraud Leads To A Series Of Crises

In the past month, the profit forecast data of Tesco Group in the first half of this year has undergone dramatic changes. On August 29 local time, Tesco said that in the six months up to August 23 local time, Tesco's trade profit in the British market reached 1.1 billion pounds. But a few days later, Tesco corrected that the expected profit was only 850 million pounds.

Under the pressure, Peter Dales, the former CEO of the company, admitted that there was an inflated profit of 250 million pounds (about 2.5 billion yuan). The British Food Business Unit under the company had a major accounting deficiency of "early recognition of revenue and delayed recognition of costs". This financial fraud case, which was exposed by the company's internal prosecutors, quickly escalated to the largest credit crisis that Tesco Group has ever faced.

This financial fraud was exposed by internal prosecution, and eight senior executives were suspended one after another. According to the subsequent comprehensive audit conducted by Deloitte Touche Tohmatsu, Tesco's false report was actually higher, at 263 million pounds (about 2.63 billion yuan).

On October 23, Tesco released its performance report for the first half of 2014. The company's sales in the first half of 2014 fell by 4.6%, operating profit fell by 41% to 937 million pounds, and revenue fell by 4.5%. Profit before tax decreased by more than 90% over the same period, and earnings per share fell from 10.17p to 0.07p, a drop of 99.3%. After the release of the performance report, Tesco's share price fell 5%.

　　 Tesco Richard Bradbent, the chairman, announced his resignation on the day of the performance announcement, but the specific date has not yet been announced. A month ago, Tesco changed its CEO and announced that Dave Lewis was the new CEO of the company.

The reporter of Time Weekly learned from Tesco's UK headquarters that the company is considering splitting its Asian business and establishing an independent company to operate independently, so as to raise 1 billion pounds to alleviate the financial crisis facing the company.

　　 Global expansion strategy failure

As a leading British retailer and one of the three largest retail enterprises in the world, Tesco has 6784 stores and 470000 employees worldwide. In addition to the UK, Tesco has conducted business in 13 other countries.

Tesco's "decline" has already appeared. In April this year, when Tesco released its 2013 financial data, it received widespread attention because of its "quarterly sales decline in the UK hit the highest in 40 years". Its domestic market share in the UK has dropped from 30.3% previously to 28.9% now.

In the view of Planet Retail analyst David Gray, Tesco's previous mistakes in global investment strategies are one of the root causes of its current situation. He also pointed out that it was only in the past two years that Tesco realized the challenges it faced in its global business.

China is one of the most serious challenges. "As China is the largest grocery retail market in the world, it is not surprising that large supermarket chains are eyeing China." Gray commented to the reporter of the Times, "but Tesco has ignored the development of the British local market while turning its main attention to international markets such as China and Thailand in recent years."

Gray further explained that the UK domestic market accounts for nearly two-thirds of Tesco's revenue and has a market share of nearly 30%, which is the basis for Tesco's survival and provides financial support for Tesco's investment and M&A in the international market.

"The simplest example is that Tesco wanted to enter the Chinese market by acquiring the equity of Taiwan's Tingxin International Group. ”He said.

Gray also pointed out that Tesco has fallen into a dilemma both at home and abroad due to the wrong investment strategy. In addition to the decline in sales performance in the domestic market, Tesco is facing an explosive decline in performance in nine major international markets.

It is worth mentioning that Tesco's investment in the US market has failed since last September. At that time, Tesco announced that it would sell its 150 loss making Fresh&Easy stores in the United States to the Yucaipa Companies of the American billionaire Ron Burkl, and close the remaining 50 stores to completely withdraw from the American market.

Then just one month later, Tesco announced that it would inject 4.325 billion yuan of Chinese retail and real estate property and cash into Liyuan, an entrepreneurial subsidiary of China Resources, to build a diversified retailer. After the completion of the transaction, China Resources Venture and Tesco Yu Liyuan held 80% and 20% shares respectively. In May this year, the transaction was officially approved.

Tesco's move in China was mercilessly evaluated by Shen Jianguo, who once worked at Tesco Supermarket and is now the chairman of Shanghai Tonglue Retail Consulting Co., Ltd., as "China Resources Venture acquired Tesco China in disguise".

　　 Lose China

For the Chinese mainland market, Tesco from the UK originally had an ambitious plan.

In fact, the establishment of Tesco Supermarket dates back to 1997, which was originally a chain supermarket brand of Taiwan Dingxin International Group. In July 2004, Tesco intended to enter the Chinese mainland market, spending 2.1 billion yuan to acquire 50% of Tesco's equity at that time, and renamed the supermarket brand "Tesco Tesco". Tesco also entered the large retail market in mainland China.

Tesco and Tingxin Group hold 50:50 shares of Tesco China. In terms of internal management structure, each department of Tesco China headquarters and regions is basically a 1:1 dual supervisor structure arrangement; The British side controls Tesco's property acquisition, acquisition, store site research and design, while the management in Taiwan has the right to purchase and operate Tesco.

This "double supervisor" model soon broke out in a situation where one mountain can't tolerate two tigers. After the short "honeymoon period", the two sides began to fight openly and secretly over the control of Tesco China.

In the view of Yan Qiang, an analyst at Zhenglue Junce, the contradiction in management led to the stagnation of the development of Tesco supermarket brand in China from the very beginning. It also missed the golden age of retail development in mainland China.

"Around 2004, China's retail industry was in the golden age of development, with a large number of foreign giants settling in. At that time, there was little difference in the number of stores of foreign retail giants. Carrefour's stores were more concentrated in East China with Shanghai as the center, while Wal Mart was concentrated in South China with Shenzhen as the center. Later, the two giants have become the climate in China and completed their layout, but unfortunately, Tesco failed to seize the opportunity of the times in the first few years. ”Yan Qiang said.

Until December 2006, Tesco once again invested 180 million pounds (about 2.8 billion yuan, when 1 pound was 15.3232 yuan) to buy 40% equity of Tesco China from Dingxin Group. Since then, Tesco's shareholding in Tesco China has increased from 50% to 90%, while Dingxin Group still holds 10% equity.

After 2010, Tesco China entered a period of rapid expansion. At that time, the UK headquarters required that Tesco's business in China should be profitable by 2015. The growth target set by the UK for Tesco China is to increase sales to 4 billion pounds (about 41.6 billion yuan), and more than double the number of stores to 200.

The total number of Tesco stores in that year was 90, which means that in five years, the average expansion rate of Tesco stores every year must be more than 22. In addition to the traditional supermarket stores, Tesco also tried to increase the number of convenience stores to expand the company's business and profits.

In 2011, British Tesco, still dreaming of "rejuvenation", issued 725 million yuan of offshore RMB bonds in Hong Kong. The financing was confirmed by Tesco to be used for retail expansion in mainland China.

At the same time, Tesco has also started a commercial real estate business in China, calling its shopping mall in China "Leduhui", and proposed to set up a total of 50 Leduhui stores in China by 2015. The investment amount of each commercial real estate project is between 400 million and 700 million yuan.

However, after all Tesco's Chinese businesses were merged into China Resources Venture in May this year, Li Ruxiong, chief financial officer of China Resources Venture, said in the mid-term performance press conference: "Tesco's layout in China is quite large, and there are some signs of over investment."

According to the data disclosed by Huachuang, Tesco's Chinese business suffered a loss of 800 million to 1 billion yuan last year.

According to the data given by David Gray, Tesco's total sales in China in 2012 were 15 billion yuan, compared with 79 billion yuan from China Resources Venture.

　　 Consider splitting Asia Business

Today, Tesco, the largest retailer in the UK, faces the first problem of how to solve the financial strain caused by internal and external difficulties?

however, Tesco Declined to comment on other issues.

According to reports, David Reeves, the new CEO, and his team have proposed a series of plans that may raise funds to ease the urgent need, and the most promising one is the divestiture of high-value Asian businesses and the realization of separate listing to obtain capital market financing. British analysts estimate that Tesco's Asian business is worth between 8 billion pounds and 10 billion pounds.

Tesco's business in South Korea and Thailand accounts for the largest proportion in its international business, and has strong value in the Malaysian market. In South Korea, Tesco has more than 400 Homeplus supermarkets. In Thailand, there are 1700 stores, including Tesco Lotus and a series of small stores.

An analyst at HSBC recently predicted that the cost of Tesco coming out of the predicament and reviving the British local market would exceed 3 billion pounds, which would be used to reduce prices, hire more employees, and improve the quality of the company's food.

However, all this will no longer have much to do with China. Because Tesco and