Buffett raises red flags around the entire U.S. retail industry

By

Cassidy Mantor

Published
May 9, 2017

Billionaire investor Warren Buffett has called for the end of retail as we know it, explaining to investors that traditional retail is over.

Known as The Oracle of Omaha for his insight into global business, Buffett has historically put his faith in American companies through his holding company Berkshire Hathaway, which has owned mainstays in apparel retail such as Walmart and Fruit of the Loom.

The first serious red flag he raised in the latest wave of retail disaster was back in February when he directed Berkshire Hathaway to sell over $900 million of Walmart stock. It picked up airline stock in turn, showing a view that business and consumers will be more airborne than ever.

Recent research has shown as retail continues to fail, entertainment, travel and technology are taking the place in consumer spending. Asset management firm Cohen & Steers said in a report they released last week that, "We see this retail weakness, which is occurring despite a relatively healthy economy, as part of a permanent evolution in how and where Americans spend their money."

Always clear in his delivery, Buffett told investors at this weekend's annual meeting for Berkshire Hathaway that "the department store is online now."

Berkshire Hathaway vice chairman Charlie Munger added how it would currently be "unpleasant" if they invested in department stores.

Macy's, Sears and JC Penney have all shaped the depressing story of department store layoffs and store closings. Those historic American retailers have contributed to over half a million layoffs in the past 15 years. Despite Amazon's ecommerce takeover of retail, Buffett is unwilling to turn his investments to online retail at this time.

As the world watches the transformation of the retail industry, and brands struggle to deliver authentic messaging to their consumers in a changing tech landscape, Buffett provides little insight into what the industry can expect.

He instead tells his investors what Target, Walmart and anyone chasing Amazon already knows, that "online [retail] is tough to figure out."