Tesco: The Costly Consequence of Buffett’s 'Moment of Laxity'

Faced with mounting competitive pressure, Tesco’s management made a series of erroneous decisions. First, Tesco over-expanded its large-format supermarkets. In an era when consumers increasingly favored convenient and online shopping, these massive stores became a heavy burden. High rents, declining foot traffic, and falling sales per square foot were eroding the company’s profitability. Second, beginning in 2011, Tesco aggressively expanded overseas—channeling substantial capital into the U.S. market in an attempt to replicate its UK success. Yet the U.S. retail sector was fiercely competitive, and Tesco’s American operations never achieved profitability. By 2013, it was forced to exit the U.S. market entirely, suffering severe losses. These overseas forays drained capital and managerial attention that should have been devoted to its core UK business. Third, Tesco relaxed control over its core operations. Like-for-like sales growth continued to decline, profitability weakened, and relationships with suppliers deteriorated—Tesco pressured suppliers ever more intensely to maintain margins, prompting several key suppliers to scale back cooperation. 3. 2012: Buffett’s 'Hesitation' By 2012, these problems had become glaringly apparent: like-for-like sales were persistently falling, market share was shrinking, and overseas expansion was encountering serious difficulties. Buffett later recalled that as early as 2012 he recognized Tesco’s troubles: management’s strategy was drifting away from its core business; competitive pressures were intensifying; and the company’s fundamentals were deteriorating. He discussed Tesco specifically with Todd Combs, Berkshire’s investment manager, and both agreed that it was time to begin reducing the position. Yet they did not act immediately. Buffett described this delay as a 'moment of laxity'. This was not due to insufficient information or underestimation of the problem’s severity—but rather a kind of inertia: since things hadn’t yet reached their worst, why not wait and see? Buffett later admitted that this 'wait-and-see' mindset was his gravest mistake regarding Tesco. 4. 2014: Crisis Erupts—Full Exit and Acknowledgment of Error In September 2014, Tesco’s crisis escalated dramatically. The company was found to have engaged in accounting fraud—overstating its half-year profit forecast and inflating earnings by hundreds of millions of pounds. This scandal shocked the market; the CEO resigned, and the stock price plunged. The UK’s Financial Conduct Authority launched a formal investigation. For Buffett, this news served as the final alarm. Accounting fraud signaled a serious breach of management integrity—the one issue he has always deemed utterly intolerable. Regardless of how much intrinsic value remained in the underlying business, once management falsified financial statements, he could no longer trust the company. In the second half of 2014, Buffett ordered the complete liquidation of Berkshire’s entire Tesco stake. From initial purchase to full exit, roughly eight years elapsed. The investment ultimately incurred a $444 million after-tax loss. VII. Cost and Outcome The $444 million loss represented less than 0.2% of Berkshire’s total assets—having virtually no impact on overall performance. Yet, as Buffett himself emphasized, this loss was entirely avoidable. Had he begun trimming the position in 2012 upon recognizing the problems, the stock price would have been significantly higher than in 2014, and the loss might have amounted to only a fraction of what it ultimately was.

Buffett’s List of Money-Losing Stocks: Lessons Learned from Nine Failed Investments

• Buffett’s Money-Losing Stock #3: Sanofi (Ticker: SNY) • Buffett’s Money-Losing Stock #4: ConocoPhillips (Ticker: COP) • Buffett’s Money-Losing Stock #5: International Business Machines Corp. (Ticker: IBM) • Buffett’s Money-Losing Stock #6: The Kraft Heinz Company (Ticker: KHC) • Buffett’s Money-Losing Stock #7: Precision Castparts (Ticker: PCP.US, now delisted) • Buffett’s Money-Losing Stock #8: Teva Pharmaceutical Industries (Ticker: TEVA) • Buffett’s Money-Losing Stock #9: The PNC Financial Services Group, Inc. (Ticker: PNC) • Quick Summary: What Can We Learn from Buffett’s List of Money-Losing Stocks? Buffett’s List of Money-Losing Stocks (Sorted by Holding Period) Buffett’s List of Money-Losing Stocks (Sorted by Holding Period) Company Name Ticker Symbol Holding Period Investment Amount Loss Magnitude Berkshire Hathaway Inc. (original textile business) BRK-A 1962–1985 $22 million −100% (textile operations closed) Tesco PLC TSCO.L 2006–2013 Over $2 billion −22.2% ($444 million) Sanofi SNY 2006–Q3 2018 Over $1.7 billion Unknown ConocoPhillips COP Q2 2008–Q4 2014 Approx. $7 billion −28.6% ($2 billion) International Business Machines Corp. IBM 2011–Q1 2018 Over $10.7 billion Over −10% ($several billion) The Kraft Heinz Company KHC Q3 2015–present Approx. $9.8 billion −52% (unrealized) Precision Castparts Delisted 2016–present Approx. $32.1 billion −31% ($10 billion reduction in asset book value in 2020) Teva Pharmaceutical Industries TEVA Q4 2017–present Over $600 million −50% (unrealized) The PNC Financial Services Group, Inc. PNC Q3 2018–Q4 2020 Over $1 billion Unknown

Britain's Tesco Raises Profit Outlook Floor After First-Half Rise

23 hours ago

Britain's largest food retailer Tesco raised its full-year profit outlook following a 6.5% first-half profit increase, forecasting adjusted operating profit between £3.15 billion and £3.3 billion despite challenges from high temperatures and energy prices.

reuters

2026-10-07

Britain's Tesco Raises Profit Outlook Floor After First-Half Rise

2026-10-08

Tesco Forecasts Healthier Christmas with Low-Alcohol Drinks as Profits Rise

Britain's Tesco Raises Profit Outlook Floor After First-Half Rise

FAQ