Tesco investment huge mistake, says Warren Buffett

Warren Buffet said investing in Tesco Plc was a “huge mistake”, as the world’s second largest retailer struggles with an 11-year-low share price, plummeting sales, and an accounting scandal that seems to get worse each week.

In an interview on CNBC on Thursday, Mr. Buffett sais “I made a mistake on that one. That was a huge mistake by me.”

In March 2006, Berkshire Hathaway Inc., Mr. Buffett’s multinational conglomerate holding company, bought $238.7 million of Tesco shares. By 2012, his company owned 5.08% of the retailer.

By the end of 2013, Berkshire Hathaway had reduced is stake in Tesco to 3.7%.

Over the past 12 months Tesco shares have dropped by 49% – seventeen percent of that fall occurred over the last two weeks, after Dave Lewis, the company’s new CEO, launched an investigation into the its accounting practices after discovering its profit guidance for this year had been inflated by ₤250 million. Mr. Lewis also suspended four senior executives.

Mr. Buffett regrets investing in Tesco plc.

For a giant company listed on the London Stock Exchange to make such a glaring accountancy error is nearly unheard of today.

To make matters worse, on Tuesday the Financial Conduct Authority (FCA), the UK’s financial watchdog, said it had launched a full investigation into Tesco’s accounting practices.

Tesco wrote in its website:

“The Financial Conduct Authority (FCA) has notified Tesco that it has commenced a full investigation following the overstatement of expected profit for the half year which was described in our announcement of 22 September 2014 and which is currently the subject of an independent review by Deloitte.”

“Tesco will continue to co-operate fully with the FCA and other relevant authorities considering this matter.”