This blog gives you the latest topical news plus some informal comments on them from ShareSoc’s directors and other contributors. These are the personal comments of the authors and not necessarily the considered views of ShareSoc. The writers may hold shares in the companies mentioned. You can add your own comments on the blog posts, but note that ShareSoc reserves the right to remove or edit comments where they are inappropriate or defamatory.

Tesco and why ShareSoc members should not have been surprised

After we published some previous comments on Tesco, Warren Buffett publicly admitted that his investment was a “huge mistake”. He currently has about a 4% stake in the company, and may have lost over $800 million at the current share price after first buying it in 2007.

It’s perhaps worth reminding ShareSoc members and others of the fact they could have read a report on the Tesco 2013 Annual General Meeting in June 2013 which spelled out some of the problems the company was facing. It is generally a pretty unenthusiastic report looking back at it. The share price then was 395p, it’s now 180p (at the time of writing). One item worth mentioning was the failure of the Audit Committee Chairman to attend that meeting. It’s a safe bet he won’t be missing the next one.

ShareSoc publishes a lot of AGM reports which are available to subscribing members. For the cost of the £38 annual membership fee, investors in Tesco might have saved themselves a lot of money by reading the report in 2013.

The latest negative news on Tesco is that they have just taken delivery of a Gulfstream 550 corporate jet which is likely valued at US$50 million, although it is reported that the new CEO is selling all the aircraft Tesco owns. But this is what ShareSoc said in December 2013:

How many corporate jets does Tesco need? Four is the answer apparently. Every little helps (sic) as is their motto no doubt. The cost of these aircraft has actually risen in recent years and the expenditure on them was £8.9m last year. In addition the company has established a new “corporate” office in the West End of London for meetings rather than have directors travel to Cheshunt (that’s just north of London for those who don’t know).

One has to ask whether they have lost the plot so far as management of a retailing company is concerned, where a focus on controlling costs is always a paramount consideration. Also senior management have to set an example to all other staff in the company if costs are not to escalate. But this surely sets a bad precedent even if the company now has operations in far flung locations.”

So ShareSoc members may not have much excuse if they did not heed the warning signs about this company.

Roger Lawson

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