There was a time when Berkshire Hathaway Vice Chairman Charles Munger said not investing early enough in Wal-Mart Stores Inc. (WMT) was one of the mistakes of the conglomerate’s first 50 years with Warren Buffett in charge. Well, it seems Mr. Buffett doesn’t believe in the retail giant any more. (See also, Wal-Mart to Consolidate Buying Operations.)
Berkshire Hathaway’s recent Form 13F filing revealed the firm cut its stake in WMT to 1,393,513 shares. That’s roughly 89.3% lower than the 12,971,574 shares the firm reported in its previous Form 13F filing. This marks the fourth consecutive quarter Buffett has cut his WMT holdings, and the fifth time in the last six quarters. Berkshire had over 60 million shares of WMT in 2014.
Worried about E-Commerce?
In a 2015 annual meeting with shareholders, Bloomberg quoted Buffett as saying, “It is a big, big force and it has already disrupted plenty of people and it will disrupt more.” He was referring to how the Amazon-led e-commerce industry is disrupting the traditional retail business.
He went on to admit that many competitors (of Amazon, surely) “including us in a few areas, have not figured the way to either participate in it, or to counter it.” Buffett also once said that it’s very difficult to turn around a retailer that has been struggling for a long time. He was talking about Sears and K-mart. In reality, both companies witnessed anything but a turnaround afterwards.
Going by that logic, Buffett believes that e-commerce is the future of retail and that since WMT has allowed Amazon to take such huge lead for a long time, WMT will forever be playing catch-up in the e-commerce space.
Did Buffett Miss WMT’s Recent Investments?
Reuters recently reported that WMT is consolidating buying e-commerce-type operations, a move that will make all the items in every Wal-Mart store become available for sale online. This move places priority on e-commerce, considering that one of Wal-Mart’s suppliers told Reuters that, “It is hard to make their online buyers a priority. I would get to them when I had a chance.” That’s because store orders have been significantly more important. This move stands to improve WMT’s e-commerce position.
Moreover, WMT is making in-store shopping more interesting and seamless with its Scan and Go technology, which allows shoppers to scan items with their phones as they shop. They then make payments with their phones as they walk out. A store with the technology is opening in Tomball, Texas today. This initiative goes further to tear down the wall between in-store and online shopping.
Maybe Buffett sees this, but simply thinks his funds can perform better elsewhere.