LONDON BRIEFING:The UK supermarket chain's move across the Atlantic is not being viewed kindly

WARREN BUFFETT’S reputation may have taken a bit of a knock over the David Sokol scandal, but when the Sage of Omaha speaks, the market still listens. And that’s unfortunate for UK supermarkets group Tesco, in which the legendary investor’s Berkshire Hathaway group holds a 3 per cent share stake.

The allegations of insider trading by Sokol, once considered Buffett’s heir apparent, dominated the agenda at last weekend’s Berkshire Hathaway shareholder meeting. But the 80-year-old Buffett also took the opportunity to share his views on Tesco’s struggle to establish itself in the world’s largest grocery market.

They were not favourable. Tesco should take a hard look at its US Fresh Easy chain, “which I’m sure they are doing”, Buffett said, although he acknowledged its sales had improved. His friend and business partner, Charlie Munger, was less restrained, joking that Fresh Easy should be renamed “Fresh Hard”.

Tesco’s move across the Atlantic, particularly into California, was ill-advised, Munger said. “I could have told them if they had asked me, but they didn’t.” Munger is well-placed to have a view on Tesco’s US expansion – as well as being Buffett’s highly-regarded partner, he has served on the board of Costco, the huge US warehouse-club retailer, for 14 years. Munger, who lives in California, has been able to observe Tesco’s efforts first hand – the British retailer chose the west coast to launch Fresh Easy and has a branch in his hometown of Pasadena.

“Tesco is God Almighty in England. But you come into southern California and you have Trader Joe’s and Costco, that’s tough competition,” Munger said. “It’s a different world.”

Neither Munger nor Buffett went as far as calling on Tesco to quit the US, nor was there any suggestion that Berkshire plans to sell its stake in the UK group. But it must be of concern to Tesco that two of the world’s savviest investors have serious concerns about its US operation, which piled up losses of £186 million in the past financial year alone.

The doubts of the Berkshire Hathaway duo echo those of City analysts, who have been dismayed by Tesco’s failure to replicate its British success across the Atlantic.

New Tesco chief executive Phil Clarke, who took over from Sir Terry Leahy in March, acknowledged the struggle with Fresh Easy when he faced the City for the first time last month, admitting the business had some way to go before it could justify Tesco’s sizeable investment.

The new Tesco boss disappointed some analysts, who fear the business will never come good and who had hoped he might pull the plug straight away.

Calling time on the US so soon into his new job would have been a tricky call for Clarke – Fresh Easy was very much Leahy’s baby and it’s not easy for any business to admit such a complete failure, particularly Tesco.

Clarke’s endorsement of the chain was less than ringing, however. Maybe the words of Buffett and Munger would make it easier to justify a retreat?

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It’s not been plain sailing back home either. Following Clarke’s admission last month that Tesco needs to sharpen up its act in the UK, the chain has been forced to water down its ill-fated Price Check campaign again, after canny customers started costing it thousands of pounds in refunds.

Price Check was launched by Tesco in March as part of a campaign to persuade shoppers its prices were lower than those of Asda. Tesco promised to refund double the difference if shoppers found they could buy items more cheaply at Asda.

But, helped by “guerilla” promotions at Asda, Tesco customers targeted cheaper items and bought them by the trolleyload at Asda to claim their refund vouchers from Tesco.

Tesco’s initial response, after just three weeks, was to impose a £20 a week limit on refunds for each customer. But it has now been forced into an even more embarrassing U-turn after it emerged that what the supermarket called a “cottage industry of savvy and determined people” had hijacked the deal.

These customers swapped tips on internet forums, with some claiming to have made hundreds of pounds in profit.

What was supposed to be a good deal for customers turned out to be rather too good for Tesco’s liking. Now, with its price credentials well and truly trashed, it is merely offering to refund the difference on cheaper Asda products.

Fiona Walsh writes for the Guardian newspaper in London