While bricks-and-mortar retail is largely a disaster, billionaire investor Warren Buffett seems to have struck gold again—in Berkshire Hathaway Inc.'s (BRK.A) retail businesses.
The Omaha, Neb.-based conglomerate reported, on Friday, Aug. 4, revenue from its retail business in the second quarter fell only slightly, by 1%, truly a feat. Berkshire reported earnings from retail increased 27% in the three months through June.
David Silverman, senior director of corporate research and retail analyst at Fitch Ratings, told TheStreet on Monday, Aug. 7, that Berkshire's retail sector is managing to buck the trend because of its furniture and home-related businesses.
Berkshire, too, reported, within its retail segment, that revenue from its home-furnishing retailers [such as Star Furniture and Jordan's Furniture], online kitchen and cooking supplies seller Pampered Chef and candy maker See's Candies, rose in the second quarter.
"Berkshire's home-related businesses have been performing relatively well on the back of a strong housing cycle as well as limited online incursion," Silverman said. "Berkshire is not tied to some of the most challenged and competitive categories within retail such as apparel, vitamins, pet supplies."
Greg McBride, chief financial analyst at Bankrate, told TheStreet on Monday that Berkshire's retailers are set up primarily as standalone stores or are online, and are not tied to malls, which makes the business less exposed to the downturn in the industry.
The ever-growing e-commerce behemoth Amazon.com Inc. (AMZN) and consumers' shift away from bricks-and-mortar shopping has pushed more traditional retailers to file for bankruptcy, including Sears Canada Inc., in 2017 so far than in all of 2016, and more still, including Macy's Inc. (M) , J.C. Penney Co. Inc. (JCP) and Sears Holdings Corp. (SHLD) , are closing many of their stores.
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Macy's is expected to release second-quarter results on Thursday, Aug. 10, when analysts surveyed at Factset expect the retailer to post $5.5 billion in revenue, compared to $5.9 billion a year ago. On Friday, Aug. 11, J.C. Penney is expected to report second-quarter revenue of $2.84 billion, a decline from the $2.92 billion posted in the 2016 second quarter.
"People are still buying, they're just buying differently," McBride said. "Retailers that aren't dependent on mall locations, can sell to a captive audience, such as in airports, or cater to higher-end clientele, have some insulation from these trends. An increase in household formation as the economy improves is a favorable development for retailers of home furnishings."
Some of Berkshire's other businesses within its retail segment include H.H. Brown Shoe Group, Borsheims Fine Jewelry and Nebraska Furniture Mart.
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