OMAHA, Neb. — In his just-released annual letter to shareholders, Berkshire Hathaway Chairman and CEO Warren Buffett says, “it’s easy to overlook the many miracles occurring in middle America,” given the coastal concentration of finance, media, government and tech.
And then he goes on to pay homage to a few of those miracles, including Nebraska Furniture Mart (Berkshire’s first furniture-store purchase) and the relentless drive of its founder Rose Blumkin and her son Louie.
Over the years, Berkshire Hathaway has purchased five businesses from Omaha families, “the best known among them being Nebraska Furniture Mart,” Buffett writes. He recounts how founder Rose Blumkin, known as Mrs. B., arrived in the states as a Russian emigrant in 1915, unable to speak or read English. She eventually settled in Omaha and by 1936, had saved enough ($2,500) to start her furniture store.
“Competitors and suppliers ignored her, and for a time their judgment seemed correct,” Buffett writes. “World War II stalled her business, and at yearend 1946, the company’s net worth had grown to only $72,264. Cash, both in the till and on deposit, totaled $50 (that’s not a typo)”
But her son Louie was the “One invaluable asset” unrecorded in those early figures, he added. He had rejoined the store after four years in the military. “Louie fought at Normandy’s Omaha Beach following the D-Day invasion, earned a Purple Heart for injuries sustained in the Battle of the Buldge, and finally sailed home in November 1945.
“Once Mrs. B and Louie were reunited, there was no stopping NFM,” Buffet writes. “Driven by their dream, mother and son worked days, nights and weekends. The result was a retailing miracle.”
By 1983, the year Berkshire bought an 80% stake in NFM, the business was worth $60 million. And like the earlier purchase of Omaha-based insurance business National Indemnity, Buffett purchased the majority stake in NFM without an audit. He notes how he counted on the Blumkin family to run the business, how the third and fourth generations do so today and how Mrs. B. worked daily until age 103, “a ridiculously premature retirement age as judged by Charlie (Munger, executive vice chairman, age 97) and me,” writes the 90-year-old Buffett.
Buffett said NFM owns the three largest home furnishings stores in the nation and that each set a sales record last year, “a feat achieved despite the closing of NFM’s stores for more than six weeks because of Covid-19.”
Berkshire’s furniture division also includes R.C. Willey, Star Furniture and Jordan’s, which combined, didn’t fare quite as well. According to the latest Securities and Exchange filing, 2020 revenues were flat compared to the year before for the company’s home furnishings operations.
“The group experienced lower revenues in the first half of 2020, attributable to restricted store hours, which were substantially offset by increase revenues over the second half of the year,” Berkshire said in the report.
“However, supply chain disruptions had a negative effect on obtaining product at certain times, which negatively affected sales levels.” 2020 pre-tax earnings for the group, however, increase 36% or by $79 million, “reflecting generally higher gross margin rates, sales mix changes and fewer sales promotions, and from lower advertising and other operating expenses.”