Three things to look out for from Tesco’s results tomorrow - other than the numbers

Lynsey Barber
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Tesco's wider business is still under pressure (Source: Getty)

When Tesco publishes its first-half results tomorrow, including an update on its investigation into an expected £250m profit black hole, all eyes will be on the numbers.

Initially, investors will look for the specifics of exactly how much profits were "overestimated" by, and what effect it has on the supermarket's previously reported profits and future forecasts.

Away from those all-important numbers though, let's not forget pre-black hole Tesco wasn't exactly in rude health: the supermarket had previously issued a string of profit warnings as the business suffered more widely.

Newly-installed chief executive Dave Lewis may have landed himself with an unexpected investigation, but there were many existing issues he is still charged with addressing.

Here are three other things to look out for which are likely to be broader indicators of where Tesco stands.

The blame game

Blame for the error has been apportioned to (unnamed) staff over the weekend. What will the consequences be?

Eight senior executives have so far “stepped aside”, and whether this is a permanent move for some or they will return to the Tesco fold will be a significant indicator of how big the issue is and how tough Lewis is willing to be to distance himself and the business from the debacle.

More significant, however, is where the buck really stops and who takes ultimate responsibility.

The issue was uncovered on Lewis’ watch, but it appears to have taken place under former chief Phil Clarke. Continuously in place throughout, however, has been chairman Sir Richard Broadbent. Questions have been raised about his position, though he has said he will remain in place. Those questions are likely to come up again tomorrow: just how forcefully will depend on how serious the accounting issues are revealed to be.

For sale

Tesco’s business is made up of more than just its supermarkets. Under Clarke, Tesco diversified into the digital sector with Blinkbox, and hospitality with restaurant chain Giraffe and coffee shop Harris + Hoole, to name just a few.

Such investments may have seemed sensible at the time, but they are now likely to be candidates for the chopping block as the retailer seeks to turn things around and fill that profit shortfall.

There have already been whispers of a sale of Blinkbox and Dunnhumby, the marketing business responsible for its Clubcard loyalty scheme.

There's also that large property portfolio: some confirmation of properties to be offloaded and relevant price tags is likely to shore up confidence that the supermarket and Lewis are taking action.

Other supermarkets

Where Tesco goes, others follow. As Britain’s largest supermarket, Tesco has the furthest to fall, but the rest of the big four - Sainsbury’s, Asda and Morrisons - may not be far behind.

Tesco is not the only one to see a declining share price, profits and sales this year.

While none have reported anywhere near as big an issue as a profit black hole, the three will suffer some of the same effects causing Tesco to struggle, most notably the loss of market share against discounters.

The market reaction to Tesco and whether that pulls other supermarkets up with it (or drags them down) will be a key indicator of investor confidence in all their abilities to effect a turnaround.

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