January 4, 2015 / 12:07 PM / 3 years ago

Tesco to announce supplier contract revamp, job cuts: Sunday Times

LONDON (Reuters) - British supermarket chain Tesco will on Thursday announce drastic changes to supplier contracts and job cuts to help rebuild its reputation after an accounting scandal and four profit warnings last year, the Sunday Times reported.

A woman walks past a Tesco supermarket in central London, December 9, 2014. REUTERS/Toby Melville

Chief Executive Dave Lewis, who joined the supermarket in September from consumer goods company Unilever, plans to scrap a complicated system of supplier contracts based on rebates and penalty fees, the paper said, citing senior sources.

Tesco declined to comment.

Incorrectly booking payments from suppliers was at the center of Tesco’s 2014 accounting debacle that led to a 263 million pound ($403.05 million) overstatement in profits. The accounting errors compounded a succession of profit warnings as low-cost rivals ate into its business.

Tesco’s share price fell 43 percent in the year to December 2014, compared with the London FTSE 100 index’s 2.7 percent decline.

Lewis is set to revamp supplier contracts by focusing on sales volumes, with higher sales leading to cuts in supplier prices, the newspaper said.

In Thursday’s third-quarter trading update Lewis is also expected to announce deep job cuts at Tesco’s headquarters and regional offices, the newspaper added.

($1 = 0.6525 pounds)

Reporting by Karolin Schaps; Editing by Mark Trevelyan and Susan Thomas

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