Tesco chairman mulling future amid accounting probe

The chairman of Tesco would consider stepping down once an investigation into accounting practices at the struggling UK grocery giant is complete, according to reports on Monday.

The speculation comes as the company attempted to repair investor sentiment with the appointment of two highly-regarded consumer-based directors to beef up its board, following a string of profit warnings and the news of a probe by the Financial Conduct Authority.

Chairman Richard Broadbent, who has been at the centre of much criticism over recent weeks after it was revealed that first-half profit guidance was overstated by some £250m, would be willing to step down if the time was right, sources cited by The Wall Street Journal said.

Tesco has surprised the market with four profit warnings since Broadbent became chairman in 2011, three of which have come in the past three months.

The FTSE 100 stock has lost 25% of its value since the company revealed on 22 September that it had overstated its profit forecasts for the six months to 23 August, mainly due to the "accelerated recognition of commercial income and delayed accrual of costs". The company has asked Deloitte to undertake an independent review.

The grocer, which just last month welcomed new chief Dave Lewis to the board, also suspended four executives and fast-tracked the appointment of new finance chief Alan Stewart as it looks to turn around its fortunes amid falling sales and shrinking market share.

In a bid to rebuild confidence, the firm also said on Monday that it would be appointing the boss of catering group Compass, Richard Cousins, and the former chief of furniture giant IKEA, Mikael Ohlsson, as non-executive directors (NEDs) in November.

Shore Capital analysts said that "NEDs rarely put pennies into the tills" but they hope that the double appointment marks the start of "more effective governance of Tesco".

"In this respect we see scope for further work embracing a larger executive component on the board in time, an evolution of the present non-executive team and the appointment of an appropriate chair person," said analysts Clive Black and Darren Shirley.

The shares were up 2.2% at 175.95p in afternoon trade.