Valuation problems force FD to quit.
The finance director of discount retailer TJ Hughes resigned last week after an investigation was launched into a ‘discrepancy in stock valuation’.
Company shares plunged by around 40% after the rapidly expanding retailer issued a profit warning that will knock around #3m off last year’s profits.
An additional charge of between #2.5m and #3m will be deducted from the company profits due to the overstatement in the valuation of stock, which directors believe could have accumulated over several years. Year-end profits for January 2001 will now be around #5m, instead of previous forecasts of #8m.
Tony Potter, finance director and company secretary since 1995, resigned with immediate effect. The Liverpool-based company, which has grown from 11 stores at its flotation in 1992 to 28 today, has started looking for a replacement for Potter who was paid #105,000 last year.
TJ Hughes had been one of the unsung heroes of the beleaguered retail sector. George Foster, chief executive, is said to remain optimistic despite last week’s profit warning.
According to the company, the discrepancy was uncovered in January due to a new management control system and an internal year-end review. PricewaterhouseCoopers, the company’s auditor, which received auditing fees of #40,000 last year and #22,000 for additional services, is expected to be at the centre of the inquiry. The firm declined to comment on the issue.
TJ Hughes said the problem was uncovered by the implementation of a new computerised stocktaking system, which revealed the paper-based system had overvalued the stock. KPMG has been brought in to investigate.
For more on the furniture retailer go to www.tjhughes.co.uk.