Warren Buffett struck some of his famous deals — taking lucrative stakes in Goldman Sachs Group Inc. and General Electric Co. — by swooping in when others panicked during the last financial crisis. He’s treading more carefully this time around.
With a record US$137 billion of cash piled up at his Berkshire Hathaway Inc., Buffett fielded questions over the weekend from shareholders who wanted to know why he hadn’t acted as companies clamored for liquidity amid the pandemic-related shutdowns. This crisis is different, Buffett said.
“We have not done anything because we don’t see anything that attractive to do,” Buffett said at his annual shareholder meeting, which was held by webcast. The deals in 2008 and 2009 weren’t done to make “a statement to the world,” he said. “They seemed intelligent things to do and markets were such that we didn’t really have much competition.”
The famous investor’s reputation allowed him to serve as a lender of last resort during the 2008 financial crisis, racking up deals that generated 10 annual dividends from household-name companies. But as panic about the virus and shutdowns assaulted equities in March and even began to freeze debt markets, the Federal Reserve beat him to the punch with an unprecedented set of emergency measures.
“There was a period right before the Fed acted, we were starting to get calls,” Buffett said at Saturday’s meeting. “They weren’t attractive calls, but we were getting calls. And the companies we were getting calls from, after the Fed acted, a number of them were able to get money in the public market frankly at terms we wouldn’t have given.”
Buffett’s cautious reaction to the latest crisis drew plenty of attention from investors. While Berkshire bought back US$1.7 billion of its shares in the first quarter, it was a net seller of stocks through April as it shed stakes in four major U.S. airlines.
The approach seems to put him in the camp of other notable investors who think markets may not have seen the worst of the impact from the pandemic. Buffett said the prospect of buying back Berkshire’s own stock isn’t much more attractive than it was in January, even as the share price dropped.
“He received much more demanding questions,” said Tom Russo, who oversees investments including Berkshire shares at Gardner Russo & Gardner LLC.
The sale of stakes in Delta Air Lines Inc., Southwest Airlines Co., American Airlines Group Inc. and United Airlines Holdings Inc. continues Buffett’s tumultuous history with the industry. He swore off the sector years ago after a troubled bet on USAir, then in 2016 he dove back in. In March, he told Yahoo Finance that he wouldn’t be selling airline stocks.
“Well, he just rejoined Airlines Anonymous,” said Bill Smead, chairman and chief investment officer of Smead Capital Management, which owns Berkshire shares.
Buffett, Berkshire’s chairman and chief executive officer, gained fame for turning a struggling textile company into a conglomerate now valued at US$444 billion. But as Berkshire swelled in size, the billionaire investor struggled to supercharge its growth amid soaring valuations in the recent bull market. That’s weighed on Berkshire’s stock price, as the Class A shares fell 19 per cent this year, more than the 12-per-cent decline in the S&P 500 Index, and have trailed the benchmark’s returns over the past decade.
In the meantime, Berkshire’s companies keep throwing off earnings, building the US$137 billion cash pile that’s equal to nearly 31 per cent of Berkshire’s market value. Buffett acknowledged that Berkshire doesn’t need that much on hand, adding that he still aims to keep his company as a “Fort Knox,” stout enough to weather the pandemic.
Buffett said he couldn’t promise Berkshire would outperform the S&P over the next decade, but he could vow not to be reckless. Maintaining that discipline is gratifying to longtime investors, said James Armstrong, who manages money, including Berkshire shares, as president of Henry H. Armstrong Associates.
“He bears a lot of responsibility and he never has any trouble remembering that Berkshire isn’t his,” Armstrong said. “Despite the criticism in the press and the public eye that he should deploy that cash, he continues to, every day, make his calculation of price to value and say, ‘I either see a good investment or I don’t.”’
Berkshire’s meeting lacked the familiar presence of his longtime business partner, Charlie Munger, as well as the thousands of audience members who normally attend the event in Omaha, Nebraska. Buffett said that Munger, 96, was still in fine health, but it didn’t make sense for him to travel from California or to have another vice chairman, Ajit Jain, come in from the East Coast in this age of social distancing.
Buffett, 89, instead was joined by a top deputy who lives just hours from Omaha, Greg Abel. A vice chairman overseeing the non-insurance units, Abel is considered a candidate to take over the CEO job someday. While Buffett still dominated the time, Abel spoke up about incoming calls before the Fed acted and gave investors a taste of his leadership style and his knowledge of Berkshire’s varied operations.
Buffett’s businesses haven’t been spared the effects of the shutdowns. The railroad BNSF reported reduced volumes as COVID-19 disrupted commerce, while footwear and apparel businesses were hit with a 34-per-cent decline in first-quarter earnings.
Munger said earlier this year that some small Berkshire units might not reopen after the pandemic. Buffett clarified the point, saying Berkshire was never willing to prop up a business amid unending losses. “There are businesses that were having problems before and that have even greater problems now,” he said.
Buffett remains cautious about the current crisis, saying that the range of economic possibilities was “extraordinarily wide.” Still, he ended the meeting on his classic optimistic note that people should never bet against America. And he left open the possibility that Berkshire’s dealmaking days will return.
The panic in markets “changed dramatically when the Fed acted, but who knows what happens next week or next month or next year? The Fed doesn’t know. I don’t know and nobody knows,” Buffett said. “There’s a lot of different scenarios that can play out. And under some scenarios, we’ll spend a lot of money. And under other scenarios, we won’t.”
TORONTO – Roots Corp. may have built its brand on all things comfy and cosy, but its CEO says activewear is now “really becoming a core part” of the brand.
The category, which at Roots spans leggings, tracksuits, sports bras and bike shorts, has seen such sustained double-digit growth that Meghan Roach plans to make it a key part of the business’ future.
“It’s an area … you will see us continue to expand upon,” she told analysts on a Friday call.
The Toronto-based retailer’s push into activewear has taken shape over many years and included several turns as the official designer and supplier of Team Canada’s Olympic uniform.
But consumers have had plenty of choice when it comes to workout gear and other apparel suited to their sporting needs. On top of the slew of athletic brands like Nike and Adidas, shoppers have also gravitated toward Lululemon Athletica Inc., Alo and Vuori, ramping up competition in the activewear category.
Roach feels Roots’ toehold in the category stems from the fit, feel and following its merchandise has cultivated.
“Our product really resonates with (shoppers) because you can wear it through multiple different use cases and occasions,” she said.
“We’ve been seeing customers come back again and again for some of these core products in our activewear collection.”
Her remarks came the same day as Roots revealed it lost $5.2 million in its latest quarter compared with a loss of $5.3 million in the same quarter last year.
The company said the second-quarter loss amounted to 13 cents per diluted share for the quarter ended Aug. 3, the same as a year earlier.
In presenting the results, Roach reminded analysts that the first half of the year is usually “seasonally small,” representing just 30 per cent of the company’s annual sales.
Sales for the second quarter totalled $47.7 million, down from $49.4 million in the same quarter last year.
The move lower came as direct-to-consumer sales amounted to $36.4 million, down from $37.1 million a year earlier, as comparable sales edged down 0.2 per cent.
The numbers reflect the fact that Roots continued to grapple with inventory challenges in the company’s Cooper fleece line that first cropped up in its previous quarter.
Roots recently began to use artificial intelligence to assist with daily inventory replenishments and said more tools helping with allocation will go live in the next quarter.
Beyond that time period, the company intends to keep exploring AI and renovate more of its stores.
It will also re-evaluate its design ranks.
Roots announced Friday that chief product officer Karuna Scheinfeld has stepped down.
Rather than fill the role, the company plans to hire senior level design talent with international experience in the outdoor and activewear sectors who will take on tasks previously done by the chief product officer.
This report by The Canadian Press was first published Sept. 13, 2024.
VANCOUVER – Mediated talks between the union representing HandyDART workers in Metro Vancouver and its employer, Transdev, are set to resume today as a strike that has stopped most services drags into a second week.
No timeline has been set for the length of the negotiations, but Joe McCann, president of the Amalgamated Transit Union Local 1724, says they are willing to stay there as long as it takes, even if talks drag on all night.
About 600 employees of the door-to-door transit service for people unable to navigate the conventional transit system have been on strike since last Tuesday, pausing service for all but essential medical trips.
Hundreds of drivers rallied outside TransLink’s head office earlier this week, calling for the transportation provider to intervene in the dispute with Transdev, which was contracted to oversee HandyDART service.
Transdev said earlier this week that it will provide a reply to the union’s latest proposal on Thursday.
A statement from the company said it “strongly believes” that their employees deserve fair wages, and that a fair contract “must balance the needs of their employees, clients and taxpayers.”
This report by The Canadian Press was first published Sept. 12, 2024.
MONTREAL – Travel company Transat AT Inc. reported a loss in its latest quarter compared with a profit a year earlier as its revenue edged lower.
The parent company of Air Transat says it lost $39.9 million or $1.03 per diluted share in its quarter ended July 31.
The result compared with a profit of $57.3 million or $1.49 per diluted share a year earlier.
Revenue in what was the company’s third quarter totalled $736.2 million, down from $746.3 million in the same quarter last year.
On an adjusted basis, Transat says it lost $1.10 per share in its latest quarter compared with an adjusted profit of $1.10 per share a year earlier.
Transat chief executive Annick Guérard says demand for leisure travel remains healthy, as evidenced by higher traffic, but consumers are increasingly price conscious given the current economic uncertainty.
This report by The Canadian Press was first published Sept. 12, 2024.
