Experienced Investor
Key shareholder cuts Tesco stake and demands ‘clear and coherent’ strategy
One of Tesco’s largest shareholders has significantly reduced its holding in the business in the past month due to a range of ‘risk factors’, according to reports.
US investor Harris Associates has reduced its stake from 3% of the business to 1% over the past month, according to the Sunday Telegraph.
The firm, which was Tesco’s seventh-largest shareholder, said it was concerned over the firm’s lack of strategy and that holding Tesco was too risky to justify.
Harris chief executive David Herro said he would await a new plan from Tesco on how it planned to turn the business around before deciding what to do with the remainder of the shares.
“With so many unknowns … those risk factors are just too high to justify a big position,” he said.
“We want to hear a clear and coherent strategy about how to get this thing moving again. We are basically in a holding pattern depending on what we hear in terms of the strategic future and where the share price is selling in terms of the valuation.”
Clive Black at Shore Capital agrees that Tesco needs to improve and soon but says there are no quick fixed to its trading problems: “Indeed, the challenges faced by this business, some from within, some from without, have seen off Philip Clarke, and so realistic expectations need to be set, to our minds, for Mr. Lewis deliver a sustained improvement in financial performance. What is also clear to us is that customers must see this benefit before shareholders and in recognition of this fact the Board, which has been sleeping at the wheel for some time, has provided some resources to allow for priority on the UK proposition, embodying a material cut in the dividend.
“..We struggle to see immediate upside from the top management change, needing as we do to understand just what state the business is in from the new man’s perspective, what needs to be done, over what time period and therefore, to what outcome for shareholders.”
Tesco surprised investors last week by revealing a profit warning and 75% dividend cut, causing shares to tumble and investors to further question the value of the business.
Tesco’s new chief executive Dave Lewis has also been called in early, taking over from Phillip Clarke as of today. Lewis was originally scheduled to arrive from Unilever in October.
