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Berkshire’s Services and Retailing Revenue Rises

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Services rebound

In 1Q18, Berkshire Hathaway’s (BRK.B) Services and Retailing revenue, excluding McLane, rose 8% YoY (year-over-year) to $6.6 billion. Service revenue grew 13% to $2.9 billion, helped by 33% growth by electronics components distributor TTI and marginal growth by FlightSafety and Charter Brokerage. Its NetJets revenue was flat.

Berkshire’s retail revenue grew 5% to $3.6 billion, helped by 4.5% growth by BHA (Berkshire Hathaway Automotive), 23% growth by See’s Candies, and 4% growth in home furnishing. BHA formed 64% of the company’s retail revenue.

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Growth in margins

Berkshire’s service pre-tax earnings grew 37% to $357 million, helped by better NetJets and TTI margins and revenue. Its retailing pre-tax earnings grew 19% to $158 million, boosted by BHA and See’s Candies margins and finance and insurance activities, and partially offset by weaker vehicle margins.

McLane

In 1Q18, wholesale distributor McLane saw its revenue grow 0.7% YoY to $12.2 billion. The company’s profits continued to decline, falling YoY to $60 million from $88 million, mainly due to higher competition in groceries and food services.

The industry is facing competition from e-tailers such as Amazon (AMZN) and eBay (EBAY). Alternative managers (XLF), including Blackstone (BX), KKR (KKR), and Apollo Global (APO), are focusing on technology-backed solutions in services and retailing to garner higher returns.

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