Investors are largely in agreement that most of Berkshire Hathaway's (NYSE: BRKA) (NYSE: BRKB) stock holdings are solid picks. Every now and then, though, one of its selections raises a few eyebrows. That's what happened when Berkshire bought 3 million shares of department store chain Macy's (NYSE: M) in the first quarter of this year.
Most people appreciate that the struggling company owns a real estate portfolio that may well be worth more than the organization's current market cap of just under $6 billion. To unlock that value, however, the company would need to take on the expensive -- and business-destructive -- headache of winding down at least some of its existing retailing operations, perhaps undermining the value of that real estate in the process. Act 2 Could Be 15x Bigger.
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Continue » But maybe Berkshire Hathaway isn't looking at what's since grown to a 7.4 million share/$162 million stake in Macy's as a real estate bet after all. It could be a legitimate turnaround play. This premise could be difficult to digest given the so-called retail apocalypse that's been underway since the advent of e-commerce.
And, anyone who's been keeping close tabs on the brick-and-mortar retailing industry's struggle probably knows that department store chains' revenue peaked in the early 2000s, and has been dwindling ever since. Now take a closer look at some numbers from the U.S. While not exactly growing, U.S. department stores' collective sales clearly aren't losing ground any longer either.
The worst of this sliver of the retailing industry's degradation may be in the rearview mirror. US Department Store Sales data by YCharts This makes some sense. Consumers eventually tire of what's common, and instead look for novelty.
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