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Buffett cuts Tesco stake after profit slump

Anna Fedorova
Written By:
Anna Fedorova

Billionaire investor Warren Buffett has cut his stake in Tesco, days after the food retailer posted a major profit slump.

At the beginning of the month Tesco reported a 68% decline in profit earnings from mainland Europe for the first half of the year.

Buffett’s Berkshire Hathaway subsequently cut its in the supermarket chain from 4.98% to 3.98% on 16 October, according to stock market filings.

The share price of the food retailer tumbled from a high of 378p on 18 September as low as low as 355p on 9 October following its H1 results, before regaining ground to trade at 372p currently.

Buffett’s move saw him sell off around £300m worth of shares in the group, which has a total market capitalisation of over £30bn and is the third largest retailer in the world.

Tesco’s profits have been hit as it has struggled to remain competitive against rivals such as Asda and J Sainsbury; the latter reported a 2% rise in second-quarter sales this month.

In the past few years, Tesco has struggled with failed attempts to break into the US and Japanese markets, as well as an expensive expansion into China.

A number of investors and analysts have downgraded the stock to sell following the recent disappointing news, the latest blow to the firm following its January 2012 profit warning – though that event saw Buffett add to his stake rather than cut his holding.