Renowned US investor Warren Buffett has said he made a “huge mistake” by investing in Tesco, as the problems mount at Britain’s largest retailer.
Tesco shares have slumped 45% this year as the supermarket issued four shock profit warnings and last week became embroiled in an accounting scandal, admitting it had overstated its profits by £250m. The retailer has been the worst performer in the FTSE 100 index this year and its shares are at an 11-year low.
Buffett, pictured, known as the Sage of Omaha and one of the world’s richest people, is Tesco’s third-largest shareholder, with a 4.1% stake, held through his Berkshire Hathaway investment business. However, the value of Buffett’s stake has fallen by about $750m (£465m) this year.
Buffett first bought into Tesco in 2006 – when Tesco was expanding rapidly in the UK and across the globe and was planning to open a new chain in the US – and steadily increased his holding.
However its US business, called Fresh & Easy, was eventually closed down altogether at a total cost of £1.8bn.
Undaunted by a shock profit warning from the company, Buffett raised his stake to over 5% when others were selling the stock. Tesco was the only stock in his top 15 picks that recorded a loss last year. Buffett told CNBC: “I made a mistake on Tesco. That was a huge mistake by me.”
The UK’s financial regulator has launched a full-scale investigation into the accounting scandal that has plunged Tesco even deeper into crisis. The retailer’s new boss, Dave Lewis, is tasked with restoring Tesco’s battered reputation as well as fixing its business amid rapidly declining sales.
Meanwhile, star UK fund manager Neil Woodford – who decided to sell his stake in Tesco in 2012 after its first profit warning – said last week it could be a long time before any of the British supermarkets became good investment prospects again.
Elsewhere in the grocery sector, Sainsbury’s shares fell again on Thursday, trading down nearly 4% at 224.8p, after its new boss, Mike Coupe, revealed a slump in sales and warned that Britain’s supermarkets are facing a “perfect storm” of problems.
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