Nobody seems to have told Berkshire Hathaway about the “death of retailing,” which is ever present in the headlines.
With Sears having filed for bankruptcy in October, and Toys R Us, Mattress Firm, hhgregg, Bon-Ton Stores, and Gymboree among the bankruptcy filers in 2018, it’s easy to think that no one can succeed at retailing these days.
On the contrary, Berkshire Hathaway’s retailing division, which includes selling home goods, furniture electronics, and appliances through Nebraska Furniture Mart, RC Willey, Star Furniture and Jordan’s Furniture, is showing robust growth.
In the first nine months of 2018, Berkshire had a 3.8% increase in retailing business revenues to $11.404 billion as compared to $10.986 billion in the same period of 2017, with gains at its home furnishings businesses.
Berkshire reported an increase in pre-tax earnings from retailing to $572 million from $513 million.
In its recently released quarterly report, Berkshire’s revenues from its home furnishing business increased 5.4% in the first nine months.
Berkshire credited its rise in retail revenues to “higher volumes in certain geographic markets and the effect of a new store, which opened in 2018.”
Berkshire’s Utah-based RC Willey, opened a second location in Sacramento, California, in January 2018.
Over all, Berkshire Hathaway’s furniture and home good business is ranked 7th on Furniture Today’s Top 100, and had estimated 2017 furniture, bedding and accessory sales of $2.01 billion.
What is the secret to Berkshire’s success in midst of all the retailer struggles? It’s simple. They invest in retailing.
In the spring of 2015, as other retailers were closing stores and slashing investments, Berkshire opened its largest Nebraska Furniture Mart ever at The Colony in Dallas-Fort Worth, Texas.
The store boasts a 1.9 million-square-foot facility featuring a 560,000-square-foot showroom. And the whole Nebraska Furniture Mart chain, which consists of only four stores, generates almost $2 billion in annual sales.
With its newest Nebraska Furniture Mart, Berkshire was out to prove that going into a retail store could be an experience still worth doing, even in the era of Amazon.
Berkshire situated its Dallas-Fort Worth Nebraska Furniture Mart in its own Texas-sized development called Grandscape.
The Berkshire development is a 400+ acres “a city within a city,” featuring more than 3 million square feet of retail, entertainment, dining, residential, office and attractions.
By going bigger and bolder, Berkshire Hathaway is taking the online retail challenge head on, and is showing that there is still customer interest in the in-store experience.
© 2018 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.