Why Warren Buffett’s Defection is a Big Loss for Tesco

- Leadership - Oct 16, 2014

The latest piece of bad news for Tesco saw influential billionaire investor Warren Buffett reduce his Berkshire Hathaway share in the UK retailer by more than 245 million shares.

With the likes of Lidl and Aldi luring customers searching more prudently for cheaper groceries, many of Britain’s supermarket establishment have seen profits drop under increasing pressure to make their stores more affordable.

Added to the fiasco of Tesco’s £250 H1 profit statement error, consumers and shareholders alike are beginning to lose confidence, with Buffett the most high-profile case to date. Berkshire Hathaway’s share now stands at less than three percent.

Even before the conglomerate trimmed its Tesco share, Buffett told American channel CNBC that the decision to invest was a “huge mistake”.

His defection is a big loss for the supermarket chain, and one which could well prompt other investors to follow suite.

Buffett, now 84m, is worth more than $65 billion according to Forbes, thanks largely to the outstanding performance of Berkshire Hathaway, which holds shares in huge blue chip companies such as IBM and American Express and Coca-Cola, where it holds the single largest stake.

He is the second-richest person in America second only to Bill Gates of Microsoft.

The company's sought-after Class A stock is the most expensive of any public US company, with Buffett’s investment portfolio stretching from railways and retail to energy and insurance. Last year he alone he posted $182 billion in revenues.

That such a formidable investor has shed 254 million shares is a disaster for Tesco, for there can be no questioning of the self-made entrepreneur’s acumen. That he admitted that investing in the first place was a mistake, makes for even worse reading.

Despite the understandable gloom the UK’s largest retailer can still hold aloft its leading status, and will be hoping for a successful Christmas period to regain some momentum which has almost completely stalled and started to swing in favour of cheaper rivals.   

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