Retail: Even Warren Buffet Finds It Baffling

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7:00 AM EDT July 17th, 2014

Retail, the one area where Warren Buffet describes his own track record as “awful,” “pretty bad” or “really bad,” reports The Wall Street Journal.

Buffet’s bad retail track record extends back to 1989 investor letter, when he referred to an investment in I Baltimore department store Hochschild Kohn, one of the conglomerate’s biggest mistakes ever.

Mr. Buffett believes retail is challenging because habits, tastes and sales channels are always in flu such that businesses don’t really build and maintain competitive advantages, or what he calls “economic moats.”

Over the years, Mr. Buffett has bought a collection of small retail companies which offered some shield, but now technology is making matters worse for retail, from Buffet and partner Charlie Munger’s point of view.

“I think the new technology is going to be very disruptive…retailing in particular is facing major threats,” Munger said at Berkshire’s annual meeting in May.

Buffet hasn’t spoken much recently about his woes in retail, but, as the Journal reports, his 2013 letter to investors discussing the poor performance of some retail investments sums up his difficulties in the sector.

“(Companies in Berkshire’s manufacturing, service and retail group) have very poor returns, a result of some serious mistakes I made in my job of capital allocation,” Buffet said. “I was not misled; I simply was wrong in my evaluation of the economic dynamics of the company or the industry in which it operated.”

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