Tesco UK chief sold 200,000 shares days before profit warning

Saturday, 14 January 2012 10:40

Tesco has come in for criticism after it has had to defend one of its directors who sold £200,000 of shares ahead of a profit warning in what has been one of the toughest weeks for the supermarket giant for 20 years.

Bob Robbins, chief operating officer of the UK business sold 50,000 shares at 404.51 pence per share for around £202,000. The sale was made just over a week before a profits warning was issued by the company.

Tesco share values have fallen by around 20 per cent since then, in just ten days, and are now valued at 316.80 pence per share. The sale fulfilled all legal obligations but the perception of such a transaction could be negative from customers and shareholders alike.

Tesco defended the share sale in a statement yesterday, saying: “Bob Robbins sold less than five per cent of his substantial shareholding in Tesco necessary for family expenditure. The sale, which was not made within a close period, was approved in the usual way.”

The sale was approved by Tesco chief executive Philip Clarke and took place three days before a “close period” which prevents directors from selling shares before a key trading update.

Tesco said that it was confident that Mr Robbins had not possessed any price sensitive information at the time the sale was approved. However, as a senior member of Tesco’s management team it seems unlikely that he would have been totally unaware of the relative lack of success of Tesco’s promotional campaign “the big price drop” and of the disappointing sales in the weeks leading up to Christmas.

Tesco said in the statement that “Tesco did not complete its Christmas trading period until after the sale was made.”

The vast majority of that period was over by the time the share sale was made and senior management, who would have been watching sales data each day in the run-up to Christmas closely, are likely to have been aware that sales and profits were lower than investors would have expected, meaning that a drop in the share price was likely.

However, Tesco said in their statement: "Bob was not party to discussions around the profit guidance or the investment plans at the time he made his sale."

Members of Tesco’s senior management team are required to hold shares to a value equivalent to at least that of their basic salary and following the share sale Mr Robbins still holds more than the minimum requirement.

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