Super-investor Warren Buffett has been a keen observer of the retail sector for decades. He predicted the demise of Kmart and Sears in 2005; today those stores are headed towards bankruptcy. Now he has divested his investment portfolio, held through the Berkshire Hathaway company, of another retailer’s stock: Walmart. Some analysts say this sends a signal that all is not well with the world’s largest brick-and-mortar retailer.
In the final three months of 2016, Buffett sold $900 million worth of Walmart stock, moving the funds into the airline sector and leaving his portfolio nearly devoid of the Bentonville, Arkansas-based retailer’s stock. With an ownership stake of just 0.05%, Berkshire is no longer a major shareholder in Walmart.
What’s dragging Walmart down? Amazon. As more shoppers head online to enjoy the convenience of click-and-ship shopping — and perhaps also to escape the downsides of interacting with the public in store environments — Amazon has grown to a market value of $365 billion, compared with Walmart, at $298 billion. Since late 2014, Walmart’s share value has fallen 20 percent, while Amazon’s has grown by 119 percent. Online shopping is heavily affecting traditional retail, Buffett said.
“It is a big, big force, and it has already disrupted plenty of people, and it will disrupt more,” Buffett said at his annual shareholders’ meeting in 2016.
Walmart insiders have acknowledged that the retail giant didn’t act fast enough to capture the attention of online shoppers at the beginning of the online shopping expansion. Former Walmart CEO Mike Duke said in 2012 that his biggest regret as CEO was not investing more in e-commerce to better compete with Amazon. “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.”
But does Buffett’s stock sale signal the beginning of the end? Not so fast. In the past five months, Walmart has purchased three online retailers, including Jet.com, and made significant investments in its online business, including a new program that gives shoppers free shipping on more than two million items when shoppers spend over $35. On February 21, the company reported that its online sales grew at a faster pace than Amazon’s. A push to provide more customer service during the holiday shopping season paid off with quarterly earnings that beat expectations.
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