Tesco forks out $12m to settle US lawsuit over profit scandal

The extent of Tesco’s profit black hole has risen to £326m

Tesco is set to fork out $12m (£7.9m) to settle a class action lawsuit by US investors over its overstatement of profit expectations last year.

American investors, who have a holding of 2% of Tesco’s stock, sued the retailer after the news of the profit overstatement caused the value of their shareholding to drop by 15%.

In 2014, Tesco admitted overstating its first-half profit expectations by £250m because it incorrectly booked payments from suppliers.

What followed that was a barrage of bad news including Tesco’s colossal £6.4bn loss and an investigation by the Serious Fraud Office.

Shore Capital analyst Clive Black said the latest settlement was “small beer in the big scheme of things… but another example of the distraction that the present management team has had to face from tidying up prior challenges and issues”.

He added: “Whilst the devil is in the detail, we deem this development to be another notch of good news, allowing senior management to focus that little bit more on the more important day job of turning this once great business around.”