Tesco crisis continues as leading shareholder slashes stake

1st Sep 2014 16:45

Pressure is growing on Tesco after one of its leading shareholders admitted it had cut its stake in the supermarket, deeming the retailer as being "too risky".Chicago-based Harris Associates was Tesco's seventh-main shareholder with a 3% stake in the business, which has now been reduced by two percentage points after the US fund revealed it had sold two-thirds of its stake in August.In a statement released over the weekend, Harris said Tesco had become too risky "to justify [having] a big position".Speaking to the Sunday Telegraph, David Herro, chief executive of Harris, said he was waiting to see if Tesco had "a clear and coherent strategy" before making further decisions over his company's stake."I really want to see what the new chief executive is going to say - how he's going to deal with the issues," said Herro. "If this thing is a turnaround story, we want to stay involved, but we need to hear a plan that makes sense."Tesco lost over £1.3bn in share value on Friday, as its shares fell to 230p, an 11-year low, after the company issued its third profit warning in eight months and was forced to slash its dividend.On Monday, Barclays cut its target price on the shares to 240p from 300p and maintained an "equal-weight" rating, on the same day when new chief executive Dave Lewis begins his career with the retailer.Lewis, who has a proven track record with Unilever but has never worked in retail, has vowed to review "every aspect of the group's operations" as Tesco looks to halt the loss of market share to the likes of Aldi and Lidl.Former Tesco chairman Lord MacLaurin said Lewis was "a very capable man" who "is going to have a really good look at all sides of the business"."[Lewis] needs to find the finest marketing man he could possibly get, with a good background in strategy and knowledge of the business," MacLaurin said.Analysts expect Lewis to adopt a drastic price-cut policy and slash the price of groceries, but even that might not be enough according to some, with Tom Stevenson of Fidelity arguing that "Buying Tesco now is a classic example of catching a falling knife".Tesco shares were down 2.14% to 225.00p at 15:38 on Monday.DC