UK retailer Tesco settles US class action suit for $16 million

Leading British retailer Tesco has settled a legal action suit by the US shareholders by agreeing to pay US$12million (AU$16.68 million). The charges levelled against the UK retailer included accounting irregularities and inflated projection of profits that artificially jacked up the share price of the retail major.

The legal suit alleged that Tesco intentionally misled investors about its financial health. It also said Tesco’s act of overstating profits guidance breached certain US securities laws.

The cash settlement by Tesco was informed at the US District Court in Manhattan and the court has to approve it, reports BBC .

Under the terms of the settlement, Tesco will not admit any liability after the retailer excused itself saying that the overstated profit guidance for the first half of 2015 was incorrectly stated from an error in booking payments from suppliers.

Tesco allegedly overstated profits to be US$263 million (AU$550 million), which ultimately triggered an investigation by the Serious Fraud Office. An independent review of the over stated profit suggested that Tesco recognised income even before it was received and also deferred the payments for its suppliers.

Settlement welcomed

Kim Miller, a partner at Kahn Swick & Foti, hailed the settlement as an “outstanding recovery.”

“We believe that chief executive Dave Lewis and his team deserve considerable credit for the way in which they have stabilised the organisation in a state of chaos - the settlement of class actions in the USA merely serving to remind us of the challenges that management have faced over the last year," they said in a note.

However, the settlement has only taken care of only one claim brought against the company. One more lawsuit is pending in Ohio by a few other holders of the American Depository Receipts.

Tesco has 568 stores throughout England, Scotland, Wales and Northern Ireland. In France, it owns 103 stores, 43 in Hungary, 31 in Poland and 13 in the Czech Republic.

Christmas season campaign

Meanwhile, Tesco is leading a strong marketing campaign for the Christmas season and is playing out the motto ‘Every little helps’, with several TV ads offering ‘little helps’ to customers in Tesco stores. The ads on TV also focuses on the festive food offer at Tesco this Christmas, reports Marketing Week.

The ads feature actress Ruth Jones of TV series "Gavin and Stacey." According to Tesco brand director Michelle McEttrick, Christmas is a special time of the year and the company is making sure “we do all we can to help it.”

Tesco’s TV campaign places emphasis on its new party food range that is helping hosts to spend more time with guests. The service orientation of Tesco’s in-store employees are also being projected in the advertisements.

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