“Retail As We Know It Is Dying” – Warren Buffett

warren buffett stocks

Warren Buffet, billionaire, and one of the most successful investors ever feels retail as we know it is about to die. There is no hope for the business. He is also walking the talk. Buffet’s holding company Berkshire Hathaway (NYSE:BRK.A) has sold off $900 million of Walmart stock and invested the entire money into airline shares. After this sale, Buffet is left with almost no stock of Wal-Mart Stores (NYSE:WMT).

Buffet commented, “Turning around a retailer that has been slipping for a long time would be very difficult”.

Walmart has been the largest retail business in America for many years now. They run 11,666 stores and clubs in 28 countries around the world as of December 31, 2016, including the United States and employ 2.3 million workers globally.

Walmart’s Market Valuation Is Less Than Amazon

However, the business has been under a lot of pressure in recent times, trying to compete with online stores such as Amazon and others. The market value of Amazon at this time is $356 billion. By comparison, Walmart has been valued considerably lower at $298 billion. So it is not surprising that Buffet has decided to sell off his stock in the company. Brick-and-mortar retailers are clearly struggling.

Amazon, on the other hand, has been doing very well. They announced in late 2016 that the last holiday season sale was their best ever.

It is not just Walmart. Other brick-and-mortar retailers are suffering too. Early last month, Macy’s announced they will be closing down 36 stores as early as spring this year. The stock prices of Kohl’s went down by 19 percent after they announced sales contraction. Sears too announced recently they will be selling Craftsman tools for $900 million to Stanley Black & Decker.

Walmart Accepts a Missed Opportunity

The Walmart stock has come down by 21 percent since the end of 2014. Amazon’s stock price, on the other hand, has gone up by 119 percent.

Mike Duke, the former Chief Executive of Walmart admitted in 2012 that not investing more in e-commerce was his biggest regret. He said, “I wish we had moved faster. We’ve proven ourselves to be successful in many areas, and I simply wonder why we didn’t move more quickly. This is especially true for e-commerce”.

Walmart (NYSE:WMT) has since then invested billions, but it still holds just a small market share, compared to Amazon. Online sales of Amazon at the end of 2015 stood at $107 billion, while Walmart could just achieve sales of $13.7 billion.