Special Report: Can Berkshire’s Nebraska Furniture Mart go for $2 billion with Dallas store?

(BRK.A), (BRK.B)

A furniture chain that produces over a billion dollars in annual revenue is a big deal, and it’s an even bigger deal when the chain has only three stores.

This is the case with Berkshire Hathaway’s Nebraska Furniture Mart (NFM), which with only 3 stores located in Omaha, Nebraska; Kansas City, Kansas; and Des Moines, Iowa, generates almost $1.04 billion in annual revenue.

That’s enough business to land NFM on the National retail federation’s “Hot 100” for 2014 despite its limited number of outlets.

The big question is whether NFM can reach $2 billion in annual sales when it opens its fourth store in the spring of 2015 at The Colony of Dallas-Fort Worth, Texas. Dallas-Fort Worth is the 4th largest metropolitan area in the United States.

Bigger is Best

NFM is known for its mega-sized stores, which include its flagship 420,000 square-feet facility in Omaha.

The new Dallas-Fort Worth store will up the ante, boasting a 1.9 million-square-foot facility featuring a 560,000-square-foot showroom that is expected to generate over $600 million in revenue annually.

A New Real Estate Play

Flying in the face of the adage that the era of the mall is dead, with retail migrating more and more to the internet, NFM is crafting a powerful regional draw that takes up lots of actual physical space rather than just cyberspace.

NFM stores have traditionally been stand-alone facilities, but with the new Dallas store NFM is developing a 400+ acres, 3.9 million square-feet mix of retail, entertainment, dining and attractions that is going by the name of Grandscape.

In addition to retail, the facility will include a hotel and amphitheater, office space, and ±300 multi-family units. NFM is betting that 18 million visitors will come to Grandscape each year, with 8 million of those visitors hopefully shopping at Nebraska Furniture Mart.

Excitement is running high even among the retailers that will be outside of the actual Grandscape footprint, and some are planning to build duplicate stores on either side of the highway to take advantage of Grandscape’s anticipated drawing power.

Average household income in the 12 county area is $57,431 with a total population in North Texas of 6.5 million. In addition, NFM believes it can draw from a huge four-state area with people traveling from as far as 300 miles away.

Revenue Projections

Is $2 billion in annual revenue realistic for four stores? Even four mega-stores? NFM is projecting that sales will grow 7% annually for the first decade with 3% growth thereafter. While 7% annual growth sounds optimistic, it is less than half of NFM’s 15.4% growth in sales in 2014.

Perhaps the bigger question is who says you have to stop at four stores?

© 2014 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results