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January sale

13 January 2012 By Quentin Webb

Tesco badly needs to regain investor trust after Thursday’s trading update wiped 5 billion pounds from its market value. Allowing a senior executive to offload shares days earlier may not have broken any rules. But this tin-eared move hardly helps the grocer’s cause.

Noel “Bob” Robbins, a company veteran who became UK chief operating officer in March, sold 50,000 Tesco shares on Jan. 4. The sale came near the end of the grocer’s crucial Christmas trading period and netted Robbins just over 202,000 pounds. Eight days later Tesco roiled the market with worse-than-expected UK seasonal sales, coupled with a profit warning for the year to come. It was a proper shocker from a company long seen as one of UK Plc’s most trusty standbys. Sold today, Robbins’ shares would fetch 40,000 pounds less. Outside investors will be forgiven for feeling exasperation.

Robbins is not a director of the company, but he is a member of its executive committee, and does count as a “person discharging managerial responsibilities” under UK listing rules. Such insiders must clear all share trades, usually with a board director or company secretary, and are largely barred from trading in the “close period” before a results announcement, and at other “prohibited” times when insider information is circulating.

Tesco says everything was above board: Robbins sold a small chunk of his stock for “necessary family expenditure” after obtaining usual approvals, and had no price-sensitive information. It notes the sale was not in a close period and contends that the market was more spooked by the outlook for profits and UK investment, to which Robbins was not party, than by actual sales data.

Fair enough. The share sale smacks more of cock-up than conspiracy. But even allowing for all these factors, the episode hurts. Three days before the end of a six-week Christmas trading period is a foolish moment for any retail operations chief to indulge in stock market activity, if only to avoid the risk of misinterpretation. Britain’s listing watchdog says directors should not just be clean in their dealings, but be seen to be clean. The grocer should have said no.


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