- Warren Buffett's company published financial results that point to a relatively healthy consumer.
- Berkshire Hathaway reported strong gains across several consumer-related businesses last quarter.
The latest figures from Warren Buffett's Berkshire Hathaway suggest consumers are faring better than they were just a year or two ago.
The famed investor's conglomerate owns a vast array of businesses, ranging from railroads to real-estate brokerages, car dealers to homebuilders, and clothing brands to food distributors. As a result, it's sometimes viewed as a microcosm of the broader US economy.
Berkshire published second-quarter earnings this month, showing that many of its consumer-related businesses returned to growth after reporting hefty declines in revenues and profits last year. Here's a roundup:
BNSF Railway
Revenues from transporting consumer products were up 12% after plunging 23% in the second quarter of last year. Volumes jumped 17% after dropping 16%.
HomeServices
Real estate brokerage revenues were almost flat and after-tax earnings rose 21%. In contrast, the division saw a 22% decline in revenues and 60% slump in profits in the same period last year.
Manufacturing: consumer products
Revenues rose 4% after tumbling 19%, and earnings climbed 7% after tanking 21%. Forest River, a maker of pontoon boats and RVs, battled steeper chassis and materials costs and a less profitable sales mix last quarter. But the segment's apparel and footwear earnings soared 41% after dropping 9% last year due to "sluggish customer demand."
Manufacturing: building products
Revenues rose 3% with Clayton Homes sales up 9%, compared to declines of 13% and 16% respectively last year. New home unit sales rose 11% after dropping 20%, but pre-tax earnings fell 10%, similar to their 12% decline last year.
McLane
Revenues at the wholesale distributor fell 3%, mostly due to lower unit volumes and softer demand from restaurants. But pre-tax earnings jumped 10% due to higher margins and lower operating expenses that offset the lower sales.
Retail
The odd one out was the retailing subdivision, where revenues fell 4.5% and pre-tax earnings fell 23%. That reflected pressure on Berkhire Hathaway Automotive, but aggregate pre-tax earnings for the rest of the division crashed 49% as "nearly all of our other retailers generated lower earnings in 2024 compared to 2023, reflecting challenging business conditions that contributed to reduced sales and increased operating expenses," Berkshire wrote in its earnings release.
Despite the retailing woes, Berkshire's overall operating income rose 15% to $11.6 billion as many of its other businesses including insurance delivered.
Signs of strength across Berkshire's railway, real estate, manufacturing, and distribution businesses are positive for the US economy — especially given the painful declines across several of those divisions a year earlier.
Within the last three years, consumers have been hit by high rates of inflation that has made essentials like food, fuel, and housing more expensive.
They've also faced rapid hikes to interest rates that have raised the monthly payments on their mortgages, car loans, credit cards, and other debts.
The one-two punch has forced many people to tap their savings, take on more debt, put away less money each month, and pull back on their spending.
The risk is that demand falters so much that firms lay off workers and a recession sets in. There's also concern on Wall Street of a market crash if company profits shrink and investors sour on stocks and bet on safe assets like government bonds instead.
Berkshire is just a small chunk of the economy, of course, but the healthy state of several of its consumer-related businesses may relieve some concerned about its overall health.