Tesco has announced a 91.9% plunge in pre-tax profits to £112 million for the first half of the year.
Britain's biggest supermarket also revealed that an investigation into overstated profit expectations had concluded it had an impact of £263 million.
The group's chairman Sir Richard Broadbent said he was preparing to step down, adding: "The issues that have come to light are a matter of profound regret."
A look at FTSE stocks that are undervalued
UK like-for-like sales were down 4.6% for the six months to August amid "strong competition across the grocery market".
Tesco has been battered by a supermarket price war amid the threat from discounters Aldi and Lidl.
Chief executive Dave Lewis said: "We know that we have got a lot of work to do. We know what it is we need to do to turn the business around."
He said a full review of the business was under way.
Article continues below
A review by Deloitte into the profits overstatement identified £118 million in relation to trading profit for the six months to August, with £70 million covering the 2013/14 financial year and about £75 million for previous periods.
However, it said no individual appears to have gained financially from the accounting error, which has led to the suspension of eight senior executives.
Sir Richard, who became chairman in 2011, said his decision to step down will help the company draw a line under the past.
He added: "The board's immediate focus must be on ensuring that we complete the transition to a new management team and that new and far-reaching business plans are put in place quickly.
"These plans will mark the beginning of a new phase for the company and I will begin now to prepare the ground to ensure an orderly process for my own succession at that time."
Read more about Tesco on AOL Money:
Tesco profits 'overstated by £250m'
Tesco executives suspended in profits probe
Tesco mothballs £22m store just weeks before opening