| 2.1°C Dublin

Boost for Tesco as Warren Buffett ups his stake

TESCO has been given a much-needed boost by Warren Buffett, arguably the world's most successful investor, who bought about £350m (€271.3m) worth of shares in the supermarket.

Tesco last week was forced to issue its first profit warning in over 20 years, a move which wiped more than £5bn off its share price and send shudders through the retail industry.

At the end of last year Mr Buffett, known as the "sage of Omaha", said he would buy more Tesco shares if the share price fell.

He has been as good as his word and following the slump in Tesco's share price last week, he increased his stake from 3.6pc to 5.1pc. He would have spent roughly £350m on his purchase.

Tesco suffered not just from a poor Christmas, with falling UK sales, but admitted it needed to spend "hundreds of millions" of pounds on improving its British supermarkets, the quality of its products and the customer service.

The admission from its chief executive Phil Clarke came as the supermarket announced it would scale back opening large out-of-town supermarkets.

Mr Buffett, who has held Tesco shares since at least 2007, said in November he wanted to increase his stake from above his current 3.6pc.

Back in September he bought another 34m shares in Tesco when the share prices was 371p, taking his stake from 3.2pc.

Asked then whether he saw attractive valuations for a long-term investor in Europe, Mr Buffett said: “Not in the debt space but certainly in the equity space."

He singled out Tesco as his top pick. "If the price came down some on Tesco I’d buy some more of that.”

Mr Buffett bought his shares on the day of the profit warning, when the shares crashed from 386p to 323p.

Tesco's shares moved up 2.18p to 323p on the disclosure of Mr Buffett's buy.