In a statement today, the embattled retailer said the overstatement of its expected profit for the six months to 29 August 2014 was largely due to the accelerated recognition of commercial income and delayed accrual of costs.

“Work is ongoing to establish the extent of these issues and what impact they will have on the full year,” the group said.

Tesco shares dropped 11 per cent to 205.55p shortly after the opening bell following the shock announcement.

Tesco has asked Deloitte to undertake an independent review, and will give an update when it releases its interim results, which will now be on 23 October.

Dave Lewis, group CEO, said: “We have uncovered a serious issue and have responded accordingly. The chairman and I have acted quickly to establish a comprehensive independent investigation. 

“The board, my colleagues, our customers and I expect Tesco to operate with integrity and transparency and we will take decisive action as the results of the investigation become clear.”

This latest profits warning is the third Tesco has issued this year: Lewis took over as chief executive in July following the departure of Philip Clarke after a profits warning. In August, the group’s shares dropped 10 per cent after it issued another and slashed its dividend by 75 per cent.

The supermarket’s shares are down 38 per cent year to date.

Marc Kimsey, senior trader at Accendo Markets, suggested today’s news is a clear indication that the stock is a basket case.
 
“Tesco is no longer a viable investment,” he said. “Traders are clearing the books of all holdings and reallocating funds in sector peers. The last two years have tested investors’ patience but with the dividend being cut back and today’s revelation, justification to hold is non-existent.”