Warren Buffett reduces Tesco stake after describing supermarket bet as 'huge mistake'

Buffett first bought into the shares in 2006 but they have dived since and he says it was a huge mistake

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The Independent Online

Legendary investor Warren Buffett has sold off a huge chunk of his stake in struggling Tesco, just days after calling his investment in the supermarkets chain a “huge mistake”.

The so-called Sage of Omaha had previously held nearly 4 per cent of the grocer, but in a regulatory filing to the stock market it was revealed his investment vehicle Berkshire Hathaway has sold down its investment to “below 3 per cent”.

Tesco investors have seen shares more than halve in the past 12 months following a series of damaging profit warnings, the revelation that the company had been running without a finance director for five months, the sacking of chief executive Phil Clarke and the uncovering last month of a £250 million black hole in its accounts. Today the shares fell 0.9p to 174p.

Buffett had previously been a big admirer of the supermarket and one of its biggest shareholders for several years.

“I made a mistake on Tesco. That was a huge mistake by me,” Berkshire, who has spent around $2.4 billion (£1.5 billion) on the shares, told CNBC.

Buffett first invested in 2006 when the shares were trading at around 350p and Tesco had high hopes for its ultimately doomed US expansion.

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A profit warning shortly followed, but Buffett went on to increase his stake to higher than 5 per cent and hailed the supermarket’s dominance and growth potential.

The shares were sold on Friday, the same day three further executives were suspended over the accounting scandal.

The decision to sell up is a huge blow to the supermarket’s new boss, Dave Lewis, who is presiding over a business which is under an internal investigation by Deloitte and law firm Freshfields. The Financial Conduct Authority is also investigating and eight directors have been suspended.

Senior sources at a major supplier to the supermarket today warned that the company was “leaderless” with a culture of fear building up because of the uncertainty over more suspensions.

The senior source said: “The confidence at Tesco is catastrophic. There’s no leadership and those in charge know nothing about Tesco.

“One of the world’s largest and most successful retailers has turned into a laughing stock and I struggle to remember anything that is comparable in UK retailing.

“It’s not business as usual, because there’s no one to talk to any more. A load of people who you’d actually speak to are gone and the ones still there are in meetings all the time.”