This Big Box Retailer Can Go Head To Head With Amazon, Billionaire Investor Predicts

Topline

Legendary investor Charlie Munger, the vice chairman at Berkshire Hathaway and longtime business partner of Warren Buffett, predicted Friday that big-box retailer Costco will eventually compete with Amazon as it expands its e-commerce business.

Key Facts

“Costco will eventually be a huge internet player” that can compete with giants like Amazon, Munger said at Sydney’s Sohn conference in comments first reported by the Australian Financial Review.

The 97-year-old thinks that Jeff Bezos’ Amazon “may have more to fear from Costco in terms of retailing than the reverse.”

Not only do people “trust” the membership-only retail chain, which has over 111 million cardholders, but it also has “enormous purchasing power,” Munger argues.

Munger has been a Costco board member since 1997 and personally owned about 166,000 shares of the company at the end of last year, according to filings—worth just over $62 million at the time.

Shares of Costco rose nearly 30% amid the pandemic last year, and have jumped another 40% so far in 2021 amid the reopening of the economy.

The big-box retailer, which is one of the largest in the world with over 800 warehouse stores, has been investing heavily in its e-commerce business: Costco last year acquired delivery service provider Innovel Solutions for around $1 billion.

Key Background:

Costco saw high demand during the pandemic lockdowns last year as people hoarded household items and groceries. The retailer is now seeing another uptick in sales as the economic reopening continues and more people shop in physical stores again. The company reported $192 billion in revenue for the fiscal year ending in September 2021, up from $163 billion in 2020. 

Big Number: $2.2 Billion

That’s how much Munger is worth, with the majority of his fortune coming from his shares of Berkshire Hathaway class A stock, according to Forbes’ estimates. He was first outed as a billionaire by Forbes in 1998.

Crucial Quote:

Morningstar analyst Zain Akbari said in a recent note that he expects “consistent, strong performance” from Costco despite upheaval in the retail sector. He argues that the retailer’s main strength is its “purchasing leverage” and the tremendous “value” that it delivers to customers. Combined with high membership retention rates, Akbari predicts that Costco’s business “should be well positioned for decades to come.”

Further Reading:

Is The Era Of Stay-At-Home Stocks Over? Here’s Why Zoom, Peloton And Others Have Slumped In 2021 (Forbes)

Here’s What Wall Street’s Biggest Banks Predict For Stocks In 2022—And What To Watch For (Forbes)

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