Billionaire Warren Buffett got rid of most of the shares that he owned British company, Tesco PLC (ADR) (OTCMKTS:TSCDY). The investment guru did this after the company had posted on of its major losses just a few months ago.
On Wednesday, Tesco reported annual losses amounting to $9.6 billion following some mistakes that seem to have pushed customers away. The loss was massive compared to the $3.4 billion profits made in the 2013 financial year.
The share value dropped by over 50% following the loss report in 2014. However, the company now seems to be on the recovery track as evident by its improving performance in 2015. Investors are also making a comeback, and the new management seems to be handling just fine. However, Mr. Buffet will not be in the team of board members following his decision to exit.
By March 1, Berkshire Hathaway had already cut off 71% of its share ownership in Tesco. Despite the share slash, the company was charged $618 million for holding in on Tesco. Tesco also experienced a heavy fall in the value of its properties that went hand in hand with the loss of clients, as well as the resultant huge loss. The property was down written by about $10 billion. Hefty retirement fund liabilities were also part of the downshifting causes.
Tesco has also been experiencing heavy competition from other retail chains that are less pricey. The company was also involved in a bookkeeping scandal where it was accused of exaggerating its revenue forecasts. Tesco did admit that the allegations were true. However, Dave Lewis, who is the company’s current CEO said that the poor results that were posted reflected the increased competition and harsh market conditions.
Additionally, Tesco failed to make a significant footprint in the Chinese market. The company is now trying on the US market. Buffet’s decision to relinquish his share ownership in the company leaves questions about the future performance of the company.
