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General Category => Strategies => Topic started by: DTEJD1997 on April 04, 2017, 11:37:55 AM

Title: Anybody else looking at bombed out retail sector?
Post by: DTEJD1997 on April 04, 2017, 11:37:55 AM
Hey all:

Anybody else looking at the bombed out retail sector?

Obviously the industry is going through hard times, and there are going to be plenty of losers...but they can't all be losers?  Can they?

Some well known big companies are selling for single digit P/E's and yields of 5%+

I think some of them also have good balance sheets...

I am looking around, but have not yet pulled the trigger.  Anybody else looking?  Thoughts?
Title: Re: Anybody else looking at bombed out retail sector?
Post by: TwoCitiesCapital on April 04, 2017, 11:57:46 AM
Hey all:

Anybody else looking at the bombed out retail sector?

Obviously the industry is going through hard times, and there are going to be plenty of losers...but they can't all be losers?  Can they?

Some well known big companies are selling for single digit P/E's and yields of 5%+

I think some of them also have good balance sheets...

I am looking around, but have not yet pulled the trigger.  Anybody else looking?  Thoughts?

I've been watching it. Bought a token position today in LB and looking to start a position in UA. Got my eyes on a few others too, but also waiting.
Title: Re: Anybody else looking at bombed out retail sector?
Post by: 50centdollars on April 04, 2017, 12:00:21 PM
I am looking at Nordstorm. I think they are a survivor.
Title: Re: Anybody else looking at bombed out retail sector?
Post by: writser on April 04, 2017, 12:05:34 PM
DDS looks somewhat interesting. Owns lots of real estate, bought back 50% of shares the past six years, trades at low multiples.
Title: Re: Anybody else looking at bombed out retail sector?
Post by: GregS on April 04, 2017, 12:21:43 PM
I've been watching DSW for some time.  Inventory growth has outpaced revenue growth since 2014, but appears to be coming in line, so maybe gross margin will stabilize.  Still opening new stores but that's slowing down too.  Zero long term debt.

However, I'm increasingly concerned online shoe shopping is improving, and DSW's purchase of Ebuys looks very defensive to me. 
Title: Re: Anybody else looking at bombed out retail sector?
Post by: rb on April 04, 2017, 12:26:22 PM
I've been keeping an eye on it as well.

LB looks interesting to me. Maybe UA and URBN.

Note that not everything retail has been bombed. WMT is hanging in and TJX seems to be unaffected as well.
Title: Re: Anybody else looking at bombed out retail sector?
Post by: GregS on April 04, 2017, 01:06:01 PM
Hey all:

Anybody else looking at the bombed out retail sector?

Obviously the industry is going through hard times, and there are going to be plenty of losers...but they can't all be losers?  Can they?

Some well known big companies are selling for single digit P/E's and yields of 5%+

I think some of them also have good balance sheets...

I am looking around, but have not yet pulled the trigger.  Anybody else looking?  Thoughts?

Care to share any tickers?

Other than DSW, LB and TGT are interesting to me right now.
Title: Re: Anybody else looking at bombed out retail sector?
Post by: rkbabang on April 04, 2017, 01:09:55 PM
I've been watching almost all of the tickers listed above as well as: TSE: HBC

I haven't bought anything yet.
Title: Re: Anybody else looking at bombed out retail sector?
Post by: TwoCitiesCapital on April 04, 2017, 01:45:56 PM
Just to clarify why I have purchased LB and nothing else so far: it's two fold.

1) Therapeutic to make up for missing it in 2008/2009 and
2) There appears to be long-term resistance at $40 which may help it from going too much lower in the short-term to medium-term.

If it went below $40 with brand still intact, I would probably consider making it a much larger position.
Title: Re: Anybody else looking at bombed out retail sector?
Post by: clutch on April 04, 2017, 02:00:32 PM
Perhaps one of the owners of LB shares could start an investment idea thread?
Title: Re: Anybody else looking at bombed out retail sector?
Post by: MarkS on April 04, 2017, 04:59:17 PM
I've been looking at GGP, KIM and sold some covered puts on SPG.

Thanks
Mark
Title: Re: Anybody else looking at bombed out retail sector?
Post by: Og on April 04, 2017, 09:40:53 PM
Recently bought some more Buckle (BKE)
Title: Re: Anybody else looking at bombed out retail sector?
Post by: DooDiligence on April 05, 2017, 06:24:45 AM
Berkshire owns Garanimal's & I own Carter's.

I believe children's clothing is a better category than tween's, teens & adults (purchasers don't have to contend with whether or not the baby likes the outfit or not - except from a comfort standpoint.)

-----

Pro's

I like their e-commerce efforts & recently opened a GA warehouse in support of online (bent a knee to Amazon by making a presence in that channel just like all the other competitors in this space: Children's Place, Gymboree, Disney, Gap, Gerber, etc.)

E-commerce had a 22% comp increase in Q4 2016 (Amazon initiative not yet started in this Q)

Most of their sales are from Canada & the US.

Sales/profits over the past decade continuously rising (no decreases even during the recession.)

GM increased from 34% to 43% over the past decade.

Nice FCF.

Returns cash to shareholders with modest buybacks & dividends.

Employs reasonable debt.

-----

Con's

Wholesale business is declining in the face of private label.

Vibrant market in "hand me downs"

Retail is a black hole...

-----

Miscellaneous:

Oshkosh brand has a lot of room to expand to catch up with Carter's brand.

Newer, side by side (Carter's/Oshkosh) stores experiencing mid single digit comp increases.

Partnered with Pou Sheng International (Holdings) Ltd., to open retail stores in China.
(Pou Sheng manages more than 8,000 stores for international brands including Nike and Sketchers.)

Plans on opening 40 outlets in China this year.

Management understands that children's wear in China has generally weak brand awareness and that the market is fragmented due to high competition, making it challenging to stand out.

Also has a presence on Alibaba but I'm not sure how much this channel contributes...

Could turn out great or could be a disaster...
Title: Re: Anybody else looking at bombed out retail sector?
Post by: kab60 on April 05, 2017, 06:37:07 AM
I've been looking at L Brands, Bed Bath & Beyond as well as Gamestop. Even though they've been slaughtered I don't think they're necessarily cheap considering the challenges that they face. So far I only play retail indirectly via Seritage and Revlon (and perhaps Auto Nation if that qualifies).
Title: Re: Anybody else looking at bombed out retail sector?
Post by: undervalued on April 05, 2017, 09:28:32 AM
There is only one winner in this space. That's AMZN. Retailers need to change their business model. To give people reason why they need to come to the stores. To try out stuff in the store then buy on AMZN is not a reason. The only reason why you would investigate this space is for cigarbut types, if they own their real estates.
Title: Re: Anybody else looking at bombed out retail sector?
Post by: GregS on April 05, 2017, 10:11:18 AM
There is only one winner in this space. That's AMZN. Retailers need to change their business model. To give people reason why they need to come to the stores. To try out stuff in the store then buy on AMZN is not a reason. The only reason why you would investigate this space is for cigarbut types, if they own their real estates.

This sentiment is exactly why I'm looking.
Title: Re: Anybody else looking at bombed out retail sector?
Post by: KCLarkin on April 05, 2017, 11:30:18 AM
There is only one winner in this space. That's AMZN. Retailers need to change their business model. To give people reason why they need to come to the stores. To try out stuff in the store then buy on AMZN is not a reason. The only reason why you would investigate this space is for cigarbut types, if they own their real estates.

This sentiment is exactly why I'm looking.

It is interesting to look at the price chart of Best Buy versus Amazon since the end of 2012. I don't know why anyone would still go to a Best Buy, but I guess some do.
Title: Re: Anybody else looking at bombed out retail sector?
Post by: rb on April 05, 2017, 11:32:02 AM
There is only one winner in this space. That's AMZN. Retailers need to change their business model. To give people reason why they need to come to the stores. To try out stuff in the store then buy on AMZN is not a reason. The only reason why you would investigate this space is for cigarbut types, if they own their real estates.

This sentiment is exactly why I'm looking.

It is interesting to look at the price chart of Best Buy versus Amazon since the end of 2012. I don't know why anyone would still go to a Best Buy, but I guess some do.
Return policy?
Title: Re: Anybody else looking at bombed out retail sector?
Post by: DTEJD1997 on April 05, 2017, 12:16:12 PM
There is only one winner in this space. That's AMZN. Retailers need to change their business model. To give people reason why they need to come to the stores. To try out stuff in the store then buy on AMZN is not a reason. The only reason why you would investigate this space is for cigarbut types, if they own their real estates.

If you truly believe this, then what value would be left in the real estate?  Are other retailers going to buy the empty stores?  I would posit that only so many empty Sears & JCP stores can be reworked into non-retail space...
Title: Re: Anybody else looking at bombed out retail sector?
Post by: Jurgis on April 05, 2017, 12:22:47 PM
It is interesting to look at the price chart of Best Buy versus Amazon since the end of 2012. I don't know why anyone would still go to a Best Buy, but I guess some do.
Return policy?

I bought Xbox and I think one laptop on BestBuy online in last couple years. Prices were cheaper than Amazon. I haven't been in their store for 5 years I think. I do online comparison shop for bigger ticket items or if I suspect I can get a better deal outside Amazon.

Re: retail - no plans to invest in the sector. We liked going to TJX and DSW, but haven't been there for a while now. We still buy clothes/shoes in TJX/DSW. Wife shops at URBN brands and Forever 21 (private) once in a while. I might have to go to Burlington Coat Factory next winterish to buy couple winter coats. Last time we went, store looked like Kmart--. :/

I wonder if NKE and/or UA will be great investments here. Barron's says yes.  ;)

Disclosure: We have a tiny bit of AMZN, a bit of TJX, and a tiny bit of URBN. Not a suggestion that any of these are buys/holds/whatever.
Title: Re: Anybody else looking at bombed out retail sector?
Post by: clutch on April 05, 2017, 12:34:16 PM
There is only one winner in this space. That's AMZN. Retailers need to change their business model. To give people reason why they need to come to the stores. To try out stuff in the store then buy on AMZN is not a reason. The only reason why you would investigate this space is for cigarbut types, if they own their real estates.

If you truly believe this, then what value would be left in the real estate?  Are other retailers going to buy the empty stores?  I would posit that only so many empty Sears & JCP stores can be reworked into non-retail space...

They will all be used for Amazon fulfillment centers  ;D
Title: Re: Anybody else looking at bombed out retail sector?
Post by: tradevestor on April 05, 2017, 01:19:46 PM
It is interesting to look at the price chart of Best Buy versus Amazon since the end of 2012. I don't know why anyone would still go to a Best Buy, but I guess some do.

Best Buy price matches (http://www.bestbuy.com/site/help-topics/best-buy-low-price-guarantee/pcmcat297300050000.c?id=pcmcat297300050000) all local retailers and major online retailers like Amazon, Newegg and TigerDirect.
Title: Re: Anybody else looking at bombed out retail sector?
Post by: DooDiligence on April 05, 2017, 05:42:38 PM
There is only one winner in this space. That's AMZN. Retailers need to change their business model. To give people reason why they need to come to the stores. To try out stuff in the store then buy on AMZN is not a reason. The only reason why you would investigate this space is for cigarbut types, if they own their real estates.

If you truly believe this, then what value would be left in the real estate?  Are other retailers going to buy the empty stores?  I would posit that only so many empty Sears & JCP stores can be reworked into non-retail space...

They will all be used for Amazon fulfillment centers  ;D

Brilliant!
Title: Re: Anybody else looking at bombed out retail sector?
Post by: tooskinneejs on April 05, 2017, 06:17:58 PM
There is only one winner in this space. That's AMZN. Retailers need to change their business model. To give people reason why they need to come to the stores. To try out stuff in the store then buy on AMZN is not a reason. The only reason why you would investigate this space is for cigarbut types, if they own their real estates.

If you truly believe this, then what value would be left in the real estate?  Are other retailers going to buy the empty stores?  I would posit that only so many empty Sears & JCP stores can be reworked into non-retail space...

They will all be used for Amazon fulfillment centers  ;D

So people will buy things online and go pick them up at local stores?  Sounds an awful lot like brick and mortar retail to me.
Title: Re: Anybody else looking at bombed out retail sector?
Post by: clutch on April 05, 2017, 08:40:16 PM
There is only one winner in this space. That's AMZN. Retailers need to change their business model. To give people reason why they need to come to the stores. To try out stuff in the store then buy on AMZN is not a reason. The only reason why you would investigate this space is for cigarbut types, if they own their real estates.

If you truly believe this, then what value would be left in the real estate?  Are other retailers going to buy the empty stores?  I would posit that only so many empty Sears & JCP stores can be reworked into non-retail space...

They will all be used for Amazon fulfillment centers  ;D

So people will buy things online and go pick them up at local stores?  Sounds an awful lot like brick and mortar retail to me.

Uh... Amazon ships people the goods bought from their fulfillment centers. I was only joking though.
Title: Re: Anybody else looking at bombed out retail sector?
Post by: rb on April 05, 2017, 08:55:26 PM
You know, this idea of Amazon of the be all and end all of retail is ridiculous. I hardly buy anything from Amazon. The reason? The stuff is usually cheaper elsewhere. So why should I go to Amazon?

I usually shop amazon for 2 things: weird things that stores don't carry and holiday gifts cause I don't want to stand in lime. There's also the odd time when I need hard drives for RAID arrays and amazon is on the list because I need drives from different batches and I split it between retailers. But that's about it tech is cheaper from other retailers.

I actually don't see a problem with retail in general. There's a huge problem with department stores. But that's because they made their living selling you mid market apparel and perfume at huge markups and that ship has sailed.
Title: Re: Anybody else looking at bombed out retail sector?
Post by: Jurgis on April 05, 2017, 09:44:49 PM
tech is cheaper from other retailers.

Maybe that's the case in Canada. In US, Amazon is lowest price for ~50% of tech. Especially if you avoid buying from dodgy (online) stores. Yes, I price compare with BestBuy, Newegg, etc. I haven't seen Newegg to be cheapest. BestBuy sometimes is. (I haven't looked at Fry's online prices recently though, maybe they are cheaper/cheapest)

Quote
I actually don't see a problem with retail in general. There's a huge problem with department stores. But that's because they made their living selling you mid market apparel and perfume at huge markups and that ship has sailed.

Just for fun: where does one supposed to buy clothes according to your worldview?
No, I'm not saying it's Amazon. I don't buy clothes online. I'm still interested in your answer.

Also, since you don't see a problem with retail in general, I'd assume you would be heavily invested in it at current low prices. What are the names that you buy/hold?
Title: Re: Anybody else looking at bombed out retail sector?
Post by: rb on April 05, 2017, 10:17:57 PM
tech is cheaper from other retailers.

Maybe that's the case in Canada. In US, Amazon is lowest price for ~50% of tech. Especially if you avoid buying from dodgy (online) stores. Yes, I price compare with BestBuy, Newegg, etc. I haven't seen Newegg to be cheapest. BestBuy sometimes is. (I haven't looked at Fry's online prices recently though, maybe they are cheaper/cheapest)

Quote
I actually don't see a problem with retail in general. There's a huge problem with department stores. But that's because they made their living selling you mid market apparel and perfume at huge markups and that ship has sailed.

Just for fun: where does one supposed to buy clothes according to your worldview?
No, I'm not saying it's Amazon. I don't buy clothes online. I'm still interested in your answer.

Also, since you don't see a problem with retail in general, I'd assume you would be heavily invested in it at current low prices. What are the names that you buy/hold?
Maybe it's a difference between Canada and the US, but I never find tech appealing on Amazon and I buy a lot of the stuff. Newegg is really good. Maybe the regular list price is not that compelling all of the time but they basically have sales all the time so with a bit of planning and patience you can get really good deals.

With clothes is a different matter. My point is that the department stores are getting squeezed out of business because they're selling mid level stuff for lots of money. I actually think the mid level segment is actually shrinking all together. If you're asking where you can buy the stuff at good prices I'd say TJX stores. This is at least from my experience in Canada where we don't have a million department stores. You'll get that mid level stuff at least half price at TJX as supposed to Sears or HBC.

I actually don't hold any retail because the prices seemed high to me. A couple of years ago I was ready to buy some TJX but I wanted it to drop another 5% before I pulled the trigger - stupid greed! What I am looking at is general retail that has an edge - TJX, Costco, WalMart. I'm also looking at specialty retail - things that are classified as retail but really aren't. My favorite is L Brands.

L-Brands is classified as retail but it really isn't. Saying LB is a retailer is a bit like saying that Sees Candy is a retailer. It's a manufacturer and a brand that sells through its own stores. It provides a reliable and quality product the people are willing to pay a premium for. At angels and aura around it don't hurt either. At 90-100 a share this was an easy pass. In the low 40s it's really interesting. The only concern that I have is their high debt load.

I hope this answers your questions.
Title: Re: Anybody else looking at bombed out retail sector?
Post by: Jurgis on April 05, 2017, 10:32:10 PM
Yes, thanks.

Not sure if Newegg/Amazon prices is Canada/USA thing or just perception or looking for sales/etc. I maybe bought once from Newegg. Any time I look there, it's more expensive than others. But I don't wait for sales there, so... I know people like their reputation... or at least they did in the past. I've bought stuff on Amazon on Black Friday/Cyber Monday. Other than that I don't try to chase sales (if they happen at all) on Amazon either.

I agree on TJX.
It's a bit difficult for me to compare retail in Canada and US. I would not compare TJX with Sears in US. Years ago (early 2Ks) Sears was viable for clothes/shoes and maybe comparable to TJX. Now it's a mess. Currently TJX comparison in "regular" retail world would be something like Kohl's I think (yeah, I know not direct comparison, but quality/prices perhaps).

I have no comment on L Brands. I assume you like Victoria's Secret part, cause the rest of the brands don't seem very good or known.

Best
Title: Re: Anybody else looking at bombed out retail sector?
Post by: DTEJD1997 on April 05, 2017, 11:31:38 PM
tech is cheaper from other retailers.

Maybe that's the case in Canada. In US, Amazon is lowest price for ~50% of tech. Especially if you avoid buying from dodgy (online) stores. Yes, I price compare with BestBuy, Newegg, etc. I haven't seen Newegg to be cheapest. BestBuy sometimes is. (I haven't looked at Fry's online prices recently though, maybe they are cheaper/cheapest)

Quote
I actually don't see a problem with retail in general. There's a huge problem with department stores. But that's because they made their living selling you mid market apparel and perfume at huge markups and that ship has sailed.

Just for fun: where does one supposed to buy clothes according to your worldview?
No, I'm not saying it's Amazon. I don't buy clothes online. I'm still interested in your answer.

Also, since you don't see a problem with retail in general, I'd assume you would be heavily invested in it at current low prices. What are the names that you buy/hold?

Sorry to horn in, but I buy a LOT of tech stuff...tens of thousands every year...Amazon frequently will have "silly" prices for a lot of the stuff I'm looking for.  I buy at Fry's and Micro-center for a good amount of stuff.

As to clothing...I rarely buy at the mall.  I used to, but have cut back by maybe 90%?  I will buy at Wal-Mart (underwear, jeans, basic stuff), Costco (they sometimes have some fairly good stuff & excellent prices/quality on basics), sometimes I will buy from Paul Frederick for work shirts, slacks, ties, etc.  Then finally I'll buy high end designer stuff off Ebay or from a local boutique that sells used stuff.  Overall, I just don't buy much clothing, not like I used to.

Finally, I don't like buying from Amazon, as they do not treat their warehouse workers well.  There are numerous stories about this...There are also rumors that they do not treat their "white collar" workers well either.  Why patronize a business like that?  Costco somehow manages to sell decent stuff and have an EXCELLENT work environment.  Same thing with Aldi.
Title: Re: Anybody else looking at bombed out retail sector?
Post by: Ballinvarosig Investors on April 06, 2017, 01:35:47 AM
You know, this idea of Amazon of the be all and end all of retail is ridiculous. I hardly buy anything from Amazon. The reason? The stuff is usually cheaper elsewhere. So why should I go to Amazon?
+1

For a supposed retailing genius, I find that the Amazon website is pretty awful. Try to buy a 64gb memory card for example at the cheapest price - it's a mess, you get all sorts of trash cluttering your search results. Try to buy a laptop with a certain specification - the website isn't specced to handle fine grained searching. The interesting thing is that there has been very little development by Amazon on their front-end for as long as I can remember. Therefore, I find it kind of cute that people talk about Amazon as a retailing genius that is unassailable. Sure, customer service is outstanding, but on the merchandising side, they could be a hell of a lot better.
Title: Re: Anybody else looking at bombed out retail sector?
Post by: DooDiligence on April 06, 2017, 05:14:57 AM
You know, this idea of Amazon of the be all and end all of retail is ridiculous. I hardly buy anything from Amazon. The reason? The stuff is usually cheaper elsewhere. So why should I go to Amazon?
+1

For a supposed retailing genius, I find that the Amazon website is pretty awful. Try to buy a 64gb memory card for example at the cheapest price - it's a mess, you get all sorts of trash cluttering your search results. Try to buy a laptop with a certain specification - the website isn't specced to handle fine grained searching. The interesting thing is that there has been very little development by Amazon on their front-end for as long as I can remember. Therefore, I find it kind of cute that people talk about Amazon as a retailing genius that is unassailable. Sure, customer service is outstanding, but on the merchandising side, they could be a hell of a lot better.

Maybe the lack of fine grain search capability is just a ploy to steer us towards what they're trying to move?

Either way, it seems that no matter whether you shop Amazon, NewEgg, BestBuy or whatever, putting items in a watchlist/wishlist & being willing to wait for value is the way to go (kind of like Mr. Market except the walk is a little less random...)
Title: Re: Anybody else looking at bombed out retail sector?
Post by: KCLarkin on April 06, 2017, 06:49:51 AM
Maverick Capital has an interesting essay on "Retail Shorts" in their 2016 letter. Skip to page 9:
http://www.superinvestorbulletin.com/2017/03/20/maverick-capital-q4-2016/
Title: Re: Anybody else looking at bombed out retail sector?
Post by: DooDiligence on April 06, 2017, 09:25:36 AM
Maverick Capital has an interesting essay on "Retail Shorts" in their 2016 letter. Skip to page 9:
http://www.superinvestorbulletin.com/2017/03/20/maverick-capital-q4-2016/

Earnings could very well take a dive (kinda like when miner PE's were super low & then the E caught up with the P.)

What did they mean by the Omni Channel short?

---

Sure is nice to have some assets left if all else fails.

LB has a lot of stores but what are they worth?

OTOH lingerie is perfect for online & omni channel.

I'm betting baby clothes will work well too...
Title: Re: Anybody else looking at bombed out retail sector?
Post by: DCG on April 06, 2017, 10:53:41 AM
There is only one winner in this space. That's AMZN. Retailers need to change their business model. To give people reason why they need to come to the stores. To try out stuff in the store then buy on AMZN is not a reason. The only reason why you would investigate this space is for cigarbut types, if they own their real estates.


Retailers that create/design their own products and have built up a brand will be fine. Amazon has hardly made a dent in supermarkets as well, and won't.
Title: Re: Anybody else looking at bombed out retail sector?
Post by: chrispy on April 08, 2017, 06:49:38 AM
Bed Bath has a big presence in the wedding & baby registries.  They make this an experience for the couple.  The couple shows up and the staff member walks them through all of the silverware and table setting options.  Then they give the couple a scanner gun to walk around and scan anything and everything onto their registry.  After their wedding, they give the couple 30% off any of the remaining items on the registry, and keep the registry open for 1.5 years in case the couple has kids and needs to do a baby registry!  I have seen newlyweds moving to amazon with a secondary registry for more unique items but all middle class couples I have seen still have a bed bath and beyond registry due to the in person experience and types of items like kitchen and bedroom sets that most newlyweds need.  Whether or not this is enough to keep a business afloat is a completely different topic...

It seems like grocery stores have a much greater moat than other brick and mortar stores.
Title: Re: Anybody else looking at bombed out retail sector?
Post by: pau_ on April 08, 2017, 09:59:01 AM
My only substantial retail holding is Kroger. They're not "bombed out" in the way some retail is, but I think for good reason. I live in Kroger's home town of Cincinnati, so discount that how you will.

I know a number of people who use their online ordering system (ClickList - $5/order, a Kroger employee shops for you and brings it out to your car), and I know from industry contacts that they have a very high quality software development org supporting this and other efforts. I see this as defensive against Amazon, and it isn't at the moment sacrificing margins (I assume $5 covers wage for order filler).

I see it as a long-term holding at a reasonable price with trustworthy, rational management.

As to Amazon eating the world: Fulfilled by Amazon (3rd party suppliers shipping to Amazon), which is a big reason for the breadth of their offering, will eventually be a brand perception/quality problem. There are already items I don't buy on Amazon (chargers), and cases where I have had to return expired or bad quality items. Think protein bar stored at wrong temp for too long in FBA supply chain, or a Seiko watch that shouldn't have passed QC (maybe it didn't!). I think retailers with more traditional supply chains may have an unrecognized quality/brand advantage.
Title: Re: Anybody else looking at bombed out retail sector?
Post by: matthylland on April 10, 2017, 02:08:49 PM
Am just staring my research into Dillard's this week. It popped up on Ben Graham's enterprising investor screen this quarter (which really just means current ratio > 1.5, price/tangible book of < 1.2, paying a Dividend and history of positive earnings).

Not that I blindly buy stocks that make the screen, but I like using it as a way to weed out 90% of what's out there and then deep dive into a few that seem interesting. Like you, the contrarian in me is attracted to the sector since it "seems" all but certain the whole industry will be replaced by AMZN!

Title: Re: Anybody else looking at bombed out retail sector?
Post by: GregS on April 10, 2017, 02:40:15 PM
I'm personally not a fan of using asset-based ratios for retailers because so much of the assets are inventories and you don't know how much they are really worth.  The bulk of the other assets are buildings and improvements which also may not be worth much in the current environment if they are tied to dying malls (land is a different story). Graham's ratios are used to identify a quantifiable margin of safety but I don't think they work for retail at all.

For me, the threshold question is merely one of durability - will this business exist in more or less its current form in 10 years? Sounds simple, but the difficultly in answering this question is why many avoid retail altogether.  This necessarily gets right into the Amazon question.  Most of the names being mentioned in this thread are arguably in the category of companies that can persist, although personally I wouldn't put DDS on the list.

The next question is valuation which is tied up in earning power, not assets.  There's tons that go in this question like SSS, store growth, margins, etc., but right now I think the biggest question is footprint - do they need to shrink?

I'm treading carefully, but many of those waiting for the market to drop 20%+ seem to be ignoring the bear markets we've had in individual sectors like retail.
Title: Re: Anybody else looking at bombed out retail sector?
Post by: writser on April 10, 2017, 03:16:45 PM
DDS also seems very cheap on a FCF basis but I'm no expert in this space.
Title: Re: Anybody else looking at bombed out retail sector?
Post by: CorpRaider on April 10, 2017, 03:31:41 PM
I missed RH.  Look at WSM from time to time before reminding myself no retail.  Was toying with hypothesis that WSM and BBBY are a little different, since many of the purchases are paid for by third parties (via registries).  Seems like a moral hazard/health insurance like recipe for guaranteed annual 12%+ price growth, but hasn't really played out like that. 

Missed Adidas when it was obviously cheap.  Would like to do UA, but can't abide that class structure.  That is a checklist item, alignment of interests, including keeping your economic and voting interests aligned; if you want to maintain voting control, maintain your investment capital in sufficient ratio to others.  I watch LULU and have missed it in the past.  Their pants make butts and thighs look much better than the imitators do.  Gap Athletica will make a great butt look bad/worse.  There's a long short play there somewhere.

Title: Re: Anybody else looking at bombed out retail sector?
Post by: GregS on April 10, 2017, 04:08:59 PM
DDS also seems very cheap on a FCF basis but I'm no expert in this space.

Pretty sure Sears traded at a single digit FCF multiple before FCF went negative.
Title: Re: Anybody else looking at bombed out retail sector?
Post by: MarkS on April 14, 2017, 10:42:33 AM
https://www.reit.com/news/videos/green-streets-sullivan-questions-pricing-declines-retail-real-estate
For me the mall reits are attractive.  Occupancy is very high with few projects in the pipeline.
Mark
Title: Re: Anybody else looking at bombed out retail sector?
Post by: gurpaul88 on April 16, 2017, 07:12:11 PM
https://www.reit.com/news/videos/green-streets-sullivan-questions-pricing-declines-retail-real-estate
For me the mall reits are attractive.  Occupancy is very high with few projects in the pipeline.
Mark

Agreed. Have some WPG and CBL
Title: Re: Anybody else looking at bombed out retail sector?
Post by: DTEJD1997 on April 16, 2017, 11:03:26 PM
https://www.reit.com/news/videos/green-streets-sullivan-questions-pricing-declines-retail-real-estate
For me the mall reits are attractive.  Occupancy is very high with few projects in the pipeline.
Mark

I took a very brief look at the mall reits and found CBL yielding over 10%  Maybe they have severe problems coming up?

Moving further down, yields were in the 4% to 5% range....not exactly what I find enticing.

Perhaps I am missing something?

Could you give a couple of mall REITs that you find interesting?
Title: Re: Anybody else looking at bombed out retail sector?
Post by: MarkS on April 17, 2017, 05:18:34 AM
Hi DTEJD1997,

I've been making a conscious effort to add more "quality" to my holdings. So I've been looking at GGP, KIM and SGP. These reits tend to have more A rated shopping centers/malls. I recently sold some SGP puts. About a week ago I purchased shares of KIM, it yields a little less than 5% but it's actually doing quite well in this environment.

In addition to WPG and CBL, you could also look at PEI and TCO, both recent Michael Price purchases.  But you are moving down in overall mall quality. 

Thanks
Mark
Title: Re: Anybody else looking at bombed out retail sector?
Post by: Spekulatius on April 18, 2017, 04:33:02 AM
I own some KRG and some SKT. SKT is a high quality Reits that owns outlets and KRG is a mall Reit on the mend with grocery anchored properties.p, with a Cap rate in the mid to high 7% range.
I have looked at WPG and CBL but I am not confident in the quality of their properties.

I think it will pay to look at quality first, and valuation second, when looking at Mall Reits. I don't think the valuation for better quality assets is at a point that warrants a large bet yet.
Title: Re: Anybody else looking at bombed out retail sector?
Post by: solobz on May 02, 2017, 08:53:29 PM
Bought WMT recently..would like to pick up TGT a little lower. For total crap, looking at SPWH now that no longer in the running for Gander Mtn stores. Not sure where the bottom is in SPWH but it looks cheap.
Title: Re: Anybody else looking at bombed out retail sector?
Post by: JayGatsby on May 04, 2017, 12:45:01 PM
This interview with Barry Sternlicht of Starwood capital group is worth watching (the video in the article, which is totally unrelated to the video but also interesting if you're interested in grocery): https://www.bloomberg.com/news/articles/2017-05-04/why-the-retail-crisis-could-be-coming-to-american-groceries

Basically that the strong will survive (and come out stronger), while the weak will disappear.
Title: Re: Anybody else looking at bombed out retail sector?
Post by: DooDiligence on May 05, 2017, 10:16:15 AM
http://www.denverpost.com/2017/05/05/gymboree-stores-closing/

Good news for CRI & PLCE
Title: Re: Anybody else looking at bombed out retail sector?
Post by: rb on May 11, 2017, 01:40:17 PM
Anyone have any idea why DG got dragged down with the rest of retail today?
Title: Re: Anybody else looking at bombed out retail sector?
Post by: DooDiligence on May 18, 2017, 04:38:06 PM
Carter’s - Oshkosh

US & Canada store comps down 10% last qtr but up 2% ytd
Opening 240 new stores by 2021 in Canada & US.
Consistently closing 5 or 6 non performing stores per year.
Co-branded stores doing well.
All stores cash flow pos.

Wholesale flat.

E-commerce biz up +20%.
New biz with Amazon (Simple Joys includes value packs developed exclusively for Amazon.)
Canada & China were big drivers online.
Launched on Alibaba T-mall in 2015 & doing well.

86% of regular customers shop in store (so says management.)
Old people with flip phones & wallets + the fast growing e-commerce enabled.

Pou Sheng International China relationship expanding (they manage more than 8000 stores in China for Nike & Sketchers among others.)
12 stores open in China now with plans to open 40 in 2017.
Wants to have 200+ stores by 2021.

http://www.chinadaily.com.cn/business/2017-03/31/content_28749781.htm

Expects 4% to 6% overall sales growth thru 2017.

I think this looks like a hit in China if Pou Sheng really wants to run with it.

People love merchandise with foreign stuff written on it (or maybe that’s just me.)

These guys get e-commerce (and, um, Garanimal’s. someone else likes children’s apparel.)
Title: Re: Anybody else looking at bombed out retail sector?
Post by: clutch on May 24, 2017, 06:56:38 AM
Retailers that create/design their own products and have built up a brand will be fine. Amazon has hardly made a dent in supermarkets as well, and won't.

I really think this is the key. It's hard to imagine retailers without much of their own brand value NOT going bankrupt. I read the annual reports of companies like DSW, glimpse over their discussion on competitive advantage, and think to myself "that's it??".  :o

I guess some of them will survive, but seems impossible to pick which one.
Title: Re: Anybody else looking at bombed out retail sector?
Post by: CONeal on May 24, 2017, 05:30:09 PM
I find it humeruous that people are preaching death of brick and mortar bc Amazon will eat their lunch.  Then low and behold Amazon opens a bookstore.
Title: Re: Anybody else looking at bombed out retail sector?
Post by: JayGatsby on July 31, 2017, 10:36:30 PM
Has anyone shopped at Kirkland's? Seems pretty cheap.
Title: Re: Anybody else looking at bombed out retail sector?
Post by: JayGatsby on August 14, 2017, 07:32:51 PM
Has anyone shopped at Kirkland's? Seems pretty cheap.
Likewise for Natural Grocers?
Title: Re: Anybody else looking at bombed out retail sector?
Post by: johnny on August 14, 2017, 09:28:28 PM
L Brands has spent $2.9B on in-store capex in the five years from 2012-2016, and every Victoria's Secret I walk by looks exactly the same as it did 10 years ago. In their defense, the company-owned storecount has gone from 2,941 to 3,074 over the same period.
Title: Re: Anybody else looking at bombed out retail sector?
Post by: rb on August 14, 2017, 09:31:21 PM
I've been looking at Foot Locker. Can't make a recommendation because I'm not sure I really understand the company yet. It looks interesting though.
Title: Re: Anybody else looking at bombed out retail sector?
Post by: LC on August 14, 2017, 10:27:01 PM
It's a sneaker retailer. I'd rather go with the branded manufacturer, imho they have more weight in the indsutey
Title: Re: Anybody else looking at bombed out retail sector?
Post by: rb on August 14, 2017, 10:30:20 PM
It's a sneaker retailer. I'd rather go with the branded manufacturer, imho they have more weight in the indsutey
I know who they are and what they do. What I don't understand is why they've been so successful and they still are. And they're selling a lot of product online as well as well. Confusing...  :-\
Title: Re: Anybody else looking at bombed out retail sector?
Post by: JayGatsby on August 14, 2017, 11:03:31 PM
It's a sneaker retailer. I'd rather go with the branded manufacturer, imho they have more weight in the indsutey
I know who they are and what they do. What I don't understand is why they've been so successful and they still are. And they're selling a lot of product online as well as well. Confusing...  :-\
Definitely interesting. Will have to dig into that one further. I recently bought shoes at shoes.com (now owned by walmart) and it's a fairly painful process. I bought size 11, which is what my old New Balances are, but it turns out I'm a 10.5 (which is what I usually am). Now they're out of the color I wanted so the exchange will be a different color. I assume after the exchange costs they're not making any money and when all's said and done it will have taken ~3 weeks for me to get the right shoes, assuming the pair on its way now is in fact the right size.

Foot Locker should be benefiting from Sports Authority shutting down. That's where I bought my last pair of sneakers in stores. I'll have to look at their conference calls and see if they mention that. MC Sports also liquidated and there may be others.

Also not sure why the shares sold off.
Title: Re: Anybody else looking at bombed out retail sector?
Post by: JayGatsby on August 15, 2017, 02:13:24 PM
Opened a small position in foot locker. Things I liked:
1. Same store sales continue to be positive
2. They're likely benefiting from closure of Sports Authority. Other stores may struggle as well. Hibbett is trading as though they will go out of business (see below)
3. Capital allocation is good. New store capex is moderate and all remaining cash flow is used to repurchase shares. They have a $1.2B share authorization is outstanding.
4. $1B net cash position.
5. Store portfolio provides some diversification; Europe stores tend to be less mall based and more street based. Kids shoes are probably more resilient versus the internet because their sizes are changing.
6. Buying shoes online is a pain
7. EBITDA margins are ~15%... higher than many retailers. This allows some margin of error

Quote
Current stores:
Foot Locker US 938
Foot Locker Europe 621
Foot Locker Canada 117
Foot Locker Asia Pacific 96
Kids Foot Locker 422
Lady Foot Locker 117
Champs Sports 545
Footaction 261
Runners Point 121
Sidestep 84
SIX:02 32

Foot Locker trades at 4.6x EBITDA. Relative to some comps this is actually a bit of a premium. As LC pointed out, Foot Locker is a true retailer; lease a box, fill it with other company's stuff. Not a real clear competitive advantage here other than name recognition and just being the incumbent in these locations.  Hibbett Sports I find interesting as well just because it has become so cheap. After a 16% selloff today it now trades for 1.6x trailing EBITDA. Hibbett preannounced that Q2 comps are down 10% "along with significant pressure on gross margin" (!!). Their strategy has been to focus on small towns with less competition. Sounds good but apparently isn't working very well. It now trades really close to net-net, although was cash negative last quarter and may be cash negative going forward.

Within Hibbett, footwear seems to be the strong area:
Quote
Footwear continued to perform well with comparable store sales in the positive low single-digit range, but apparel and equipment posted negative comparable store sales.
And at Dick's:
Quote
"In this very competitive and dynamic marketplace, we were able to deliver a significant increase in our bottom line from last year. We continued to capture market share and generated strong results in eCommerce, footwear and golf, although sales were pressured by weakness in hunting, licensed and athletic apparel," said Edward W. Stack, Chairman and Chief Executive Officer.
Title: Re: Anybody else looking at bombed out retail sector?
Post by: JayGatsby on August 18, 2017, 09:29:49 AM
Opened a small position in foot locker.
Oops!
Title: Re: Anybody else looking at bombed out retail sector?
Post by: rb on August 18, 2017, 09:37:19 AM
Opened a small position in foot locker.
Oops!
Yep, big oops. I'm sorry if my yapping contributed to your troubles.

I'm actually starting to think that these issues are coming from malls. Lower traffic in malls -> lower retail sales. Maybe it's like this: Before you went to the mall cause u needed a piece of crap so while you were there u picked out some more crap that you didn't want. A shirt, whatever. Now that there's more avenues to get the initial crap there's less chance that the extra crap will attach itself to your sticky fingers.

The result is horrible earnings not just for "pure retailers" like foot locker but also for brand retailers like Nike, LB, RL, etc.
Title: Re: Anybody else looking at bombed out retail sector?
Post by: GregS on August 18, 2017, 09:48:25 AM
Mall anchors are falling apart. It's hard to own anything traditional mall-based.
Title: Re: Anybody else looking at bombed out retail sector?
Post by: rb on August 18, 2017, 09:51:50 AM
Do you have a view of why they're falling apart?
Title: Re: Anybody else looking at bombed out retail sector?
Post by: JayGatsby on August 18, 2017, 09:55:15 AM
Opened a small position in foot locker.
Oops!
Yep, big oops. I'm sorry if my yapping contributed to your troubles.

I'm actually starting to think that these issues are coming from malls. Lower traffic in malls -> lower retail sales. Maybe it's like this: Before you went to the mall cause u needed a piece of crap so while you were there u picked out some more crap that you didn't want. A shirt, whatever. Now that there's more avenues to get the initial crap there's less chance that the extra crap will attach itself to your sticky fingers.

The result is horrible earnings not just for "pure retailers" like foot locker but also for brand retailers like Nike, LB, RL, etc.
It wasn't a big position. More buybacks at this price...

I think that's definitely true re malls. There has to be a reason to take you there. Hibbett (the sports store I mentioned above) was crushed today as well (I didn't take a position in that). They're mainly strip malls. I think you also saw an oversupply of malls, so the weak will now close.

There seems to be an odd disconnect between what the Commerce Department is reporting (see quote below) and what retailers are reporting. Have any retailers, grocers, or auto companies reported strength or year-over-year increases? I know TJ Maxx and Ross are faring reasonably well, although they're deep discount stores. Every company I read is describing a very challenging retail environment with less traffic and more discounting. Seems like part of it may be that the consumer is pulling back, although the Commerce Dept says the opposite. Am I seeing things in the ink stains again?

Quote
U.S. retail sales recorded their biggest increase in seven months in July as consumers boosted purchases of motor vehicles and raised discretionary spending, suggesting the economy continued to gain momentum early in the third quarter.

Retail sales for June and May also were revised higher, which should help to assuage concerns about consumer spending after a slowdown at the start of the year. Tuesday's upbeat report from the Commerce Department likely keeps the Federal Reserve on course to raise interest rates again in December.

"American shoppers flocked to the malls in July, suggesting consumers are well-positioned to propel the economy forward in the second half of the year," said Sal Guatieri, a senior economist at BMO Capital Markets in Toronto.

Title: Re: Anybody else looking at bombed out retail sector?
Post by: rb on August 18, 2017, 10:19:33 AM
Jay, I'd disregard the whole "flocked to the malls thing". That's a rent-a-quote whenever they see retail sales up.

The commerce release specifically quotes auto sales. Those can really push the retail sales numbers when they're doing good, cause well... a car costs more than a shirt. I can't really contradict them on whether there was true strength in autos in July since I think that Commerce has better numbers than me. I also think that there's a lot of big ticket items in that retail sales print driven by the housing recovery. Home Depot and Lowes are also doing very well.

In addition, a lot of retail has very high fixed costs. That marginal shirt of pair of sneakers costs very little to produce. So a relatively small decrease in volume can do a real number on earnings.

I think that the reason why TJX and Ross aren't that affected is that their shoppers weren't and aren't impulse buyers. You needed some socks or a shirt you went to Marshalls. People still need socks and shirts.
Title: Re: Anybody else looking at bombed out retail sector?
Post by: rkbabang on August 18, 2017, 10:37:56 AM
Jay, I'd disregard the whole "flocked to the malls thing". That's a rent-a-quote whenever they see retail sales up.

The commerce release specifically quotes auto sales. Those can really push the retail sales numbers when they're doing good, cause well... a car costs more than a shirt. I can't really contradict them on whether there was true strength in autos in July since I think that Commerce has better numbers than me. I also think that there's a lot of big ticket items in that retail sales print driven by the housing recovery. Home Depot and Lowes are also doing very well.

In addition, a lot of retail has very high fixed costs. That marginal shirt of pair of sneakers costs very little to produce. So a relatively small decrease in volume can do a real number on earnings.

I think that the reason why TJX and Ross aren't that affected is that their shoppers weren't and aren't impulse buyers. You needed some socks or a shirt you went to Marshalls. People still need socks and shirts.

Also JTX stores (Marshals, Home Goods, TJMaxx) are not usually located in malls.  People who shop there have always gone there as their destination, so they never relied on mall walking traffic for impulse buys.

I ended up picking up some L Brands (LB) around when this thread first started. My wife assures me that most women will never buy bras online.  I'm down about 30% from my cost basis at the moment.
Title: Re: Anybody else looking at bombed out retail sector?
Post by: Cameron on August 18, 2017, 10:55:14 AM
Jay, I'd disregard the whole "flocked to the malls thing". That's a rent-a-quote whenever they see retail sales up.

The commerce release specifically quotes auto sales. Those can really push the retail sales numbers when they're doing good, cause well... a car costs more than a shirt. I can't really contradict them on whether there was true strength in autos in July since I think that Commerce has better numbers than me. I also think that there's a lot of big ticket items in that retail sales print driven by the housing recovery. Home Depot and Lowes are also doing very well.

In addition, a lot of retail has very high fixed costs. That marginal shirt of pair of sneakers costs very little to produce. So a relatively small decrease in volume can do a real number on earnings.

I think that the reason why TJX and Ross aren't that affected is that their shoppers weren't and aren't impulse buyers. You needed some socks or a shirt you went to Marshalls. People still need socks and shirts.

Also JTX stores (Marshals, Home Goods, TJMaxx) are not usually located in malls.  People who shop there have always gone there as their destination, so they never relied on mall walking traffic for impulse buys.

I ended up picking up some L Brands (LB) around when this thread first started. My wife assures me that most women will never buy bras online.  I'm down about 30% from my cost basis at the moment.

The story of Victoria Secrets founding is interesting one, the idea of why it was founded and what it turned into.

Anyway stores that are effected by online competitors like Amazon etc more so has to do with their customer base rather than what they sell. Quoting The New Yorker "Bezos said that Amazon intended to sell books as a way of gathering data on affluent, educated shoppers" anyone without a core customer base like the one described with be fine as long as they invest in ecommerce themselves.
Title: Re: Anybody else looking at bombed out retail sector?
Post by: GregS on August 18, 2017, 11:16:12 AM
Do you have a view of why they're falling apart?

No particular original thoughts, just the struggles of anchor dept stores like M, JCP, SHLD, and the model of those stores driving traffic breaking down. Not a big secret.  I've just stayed away from mid-mall retailers like FL and LB.  I don't see how they can keep open all their locations in the long run.

Title: Re: Anybody else looking at bombed out retail sector?
Post by: rb on August 18, 2017, 11:25:25 AM
Jay, I'd disregard the whole "flocked to the malls thing". That's a rent-a-quote whenever they see retail sales up.

The commerce release specifically quotes auto sales. Those can really push the retail sales numbers when they're doing good, cause well... a car costs more than a shirt. I can't really contradict them on whether there was true strength in autos in July since I think that Commerce has better numbers than me. I also think that there's a lot of big ticket items in that retail sales print driven by the housing recovery. Home Depot and Lowes are also doing very well.

In addition, a lot of retail has very high fixed costs. That marginal shirt of pair of sneakers costs very little to produce. So a relatively small decrease in volume can do a real number on earnings.

I think that the reason why TJX and Ross aren't that affected is that their shoppers weren't and aren't impulse buyers. You needed some socks or a shirt you went to Marshalls. People still need socks and shirts.

Also JTX stores (Marshals, Home Goods, TJMaxx) are not usually located in malls.  People who shop there have always gone there as their destination, so they never relied on mall walking traffic for impulse buys.

I ended up picking up some L Brands (LB) around when this thread first started. My wife assures me that most women will never buy bras online.  I'm down about 30% from my cost basis at the moment.
I agree on L-Brands. I like the company and the market likes its product. But LB also had some impulse buy/traffic driven sales. As I've said those sales are extremely profitable. So LB's core earnings are lower than what we're seeing now once we strip that out. What really worries me about LB is their huge debt. The question in my mind is can they readjust to a lower base of earnings while carrying this debt or is it possibly fatal?
Title: Re: Anybody else looking at bombed out retail sector?
Post by: Jurgis on August 18, 2017, 12:15:25 PM
I think that the reason why TJX and Ross aren't that affected is that their shoppers weren't and aren't impulse buyers. You needed some socks or a shirt you went to Marshalls. People still need socks and shirts.

Sorry, man, you're totally wrong.  8)
We go to TJMaxx or Marshalls and pretty always buy tons of impulse crap.
The stores are like a fricking treasure hunt for a reason.  8)
But that's also probably a reason they don't feel Amazonification much. You can't go to Marshalls and be sure that you gonna get a particular shirt. But you'll likely go there and get 5 shirts on the cheap and pretty good ones too... but not the ones you wanted to get...  ::) and also a pet sofa ... bunch of chocolate ... soap holder ... frog statue ... and iPhone case...
Title: Re: Anybody else looking at bombed out retail sector?
Post by: rb on August 18, 2017, 12:16:44 PM
lol ok. Maybe it's just me then.
Title: Re: Anybody else looking at bombed out retail sector?
Post by: JayGatsby on August 18, 2017, 12:17:03 PM
Jay, I'd disregard the whole "flocked to the malls thing". That's a rent-a-quote whenever they see retail sales up.

The commerce release specifically quotes auto sales. Those can really push the retail sales numbers when they're doing good, cause well... a car costs more than a shirt. I can't really contradict them on whether there was true strength in autos in July since I think that Commerce has better numbers than me. I also think that there's a lot of big ticket items in that retail sales print driven by the housing recovery. Home Depot and Lowes are also doing very well.

In addition, a lot of retail has very high fixed costs. That marginal shirt of pair of sneakers costs very little to produce. So a relatively small decrease in volume can do a real number on earnings.

I think that the reason why TJX and Ross aren't that affected is that their shoppers weren't and aren't impulse buyers. You needed some socks or a shirt you went to Marshalls. People still need socks and shirts.
Fair point. Here's the data straight from Census: https://www.cnbc.com/2017/07/03/june-auto-sales.html
They show a 4.5% increase in motor vehicle / parts, while auto companies are reporting a decline: https://www.cnbc.com/2017/07/03/june-auto-sales.html
Clothing they show flat
Sporting goods they show -4.9%
Title: Re: Anybody else looking at bombed out retail sector?
Post by: Jurgis on August 18, 2017, 12:18:38 PM
lol ok. Maybe it's just me then.

The no-impulse-buying Force is strong with you.  8)
Title: Re: Anybody else looking at bombed out retail sector?
Post by: rb on August 18, 2017, 12:39:31 PM
Fair point. Here's the data straight from Census: https://www.cnbc.com/2017/07/03/june-auto-sales.html
They show a 4.5% increase in motor vehicle / parts, while auto companies are reporting a decline: https://www.cnbc.com/2017/07/03/june-auto-sales.html
Clothing they show flat
Sporting goods they show -4.9%
The CNBC links are for June sales.

Anyway I looked at the commerce report for July and the standard errors are actually pretty large. So basically don't read too much into it because it's not very reliable.
Title: Re: Anybody else looking at bombed out retail sector?
Post by: GregS on August 18, 2017, 12:46:06 PM
I think that the reason why TJX and Ross aren't that affected is that their shoppers weren't and aren't impulse buyers. You needed some socks or a shirt you went to Marshalls. People still need socks and shirts.

Sorry, man, you're totally wrong.  8)
We go to TJMaxx or Marshalls and pretty always buy tons of impulse crap.
The stores are like a fricking treasure hunt for a reason.  8)
But that's also probably a reason they don't feel Amazonification much. You can't go to Marshalls and be sure that you gonna get a particular shirt. But you'll likely go there and get 5 shirts on the cheap and pretty good ones too... but not the ones you wanted to get...  ::) and also a pet sofa ... bunch of chocolate ... soap holder ... frog statue ... and iPhone case...

That was an awesome post Jurgis, spot on.  I think it's hard for us on-the-spectrum, stuck-at-our-computer finance types to always understand retail.  It pays to know some people who hide their credit card bills from their spouses.
Title: Re: Anybody else looking at bombed out retail sector?
Post by: Jurgis on August 18, 2017, 12:56:21 PM
It pays to know some people who hide their credit card bills from their spouses.

I don't. I'm not standard. Very anecdotal.  ::)

Also influenced by Soviet upbringing which totally plays into the retailers' hands. Buy today, FINAL SALE! it won't be available tomorrow...  ::) (BTW, this is mostly not a lie at TJMaxx, Marshalls: stuff is single units and won't be available tomorrow.)

OTOH, I don't throw away the shirts and shoes that I bought ten years ago (on that FINAL SALE!!!!). I still wear them until worn out...  ::)


But, yeah, in general I totally agree with you: if you invest in retail, it's good to know some people who dig retail deeply. Especially if your investment concept is more than just "low cost wins" (e.g. buying WMT in the past). I knew a person like that once... too bad I was not investing then and I did not know what a treasure it was to know someone like that...
Title: Re: Anybody else looking at bombed out retail sector?
Post by: rkbabang on August 18, 2017, 12:56:34 PM
I think that the reason why TJX and Ross aren't that affected is that their shoppers weren't and aren't impulse buyers. You needed some socks or a shirt you went to Marshalls. People still need socks and shirts.

Sorry, man, you're totally wrong.  8)
We go to TJMaxx or Marshalls and pretty always buy tons of impulse crap.
The stores are like a fricking treasure hunt for a reason.  8)
But that's also probably a reason they don't feel Amazonification much. You can't go to Marshalls and be sure that you gonna get a particular shirt. But you'll likely go there and get 5 shirts on the cheap and pretty good ones too... but not the ones you wanted to get...  ::) and also a pet sofa ... bunch of chocolate ... soap holder ... frog statue ... and iPhone case...

We do as well, but you don't walk in on impulse as you might a mall store if you were already walking through the mall.  You go to a JTX store, because you decided to go there.
Title: Re: Anybody else looking at bombed out retail sector?
Post by: johnny on August 21, 2017, 01:24:01 AM
What really worries me about LB is their huge debt. The question in my mind is can they readjust to a lower base of earnings while carrying this debt or is it possibly fatal?

What worries me is that they spent $2.9B on in-store capex in five years (2012-2016) and every VS store I walk by looks exactly the same as it did when I was 16.
Title: Re: Anybody else looking at bombed out retail sector?
Post by: CorpRaider on August 24, 2017, 06:06:27 AM
Here.we.go. ;D
Title: Re: Anybody else looking at bombed out retail sector?
Post by: JayGatsby on August 24, 2017, 01:45:51 PM
Here.we.go. ;D
Signet?

I sold KIRK after they reported a good quarter. Small profit, although I left some on the table. I find the combination of "growth" and "value" in these retailers to be nearly impossible to value. Meaning companies that are actively investing to continue to grow their footprint while they have declining same store trends, producing a company that trades exceptionally cheap on a trailing EBITDA / maintenance FCF basis, but not at a discount on actual FCF basis. There's potentially some additional selling pressure as the growth investors move out. KIRK or NGVC are both examples of that. NGVC has been discounting their bacon massively so for now I've decided to play it that way...  8)
Title: Re: Anybody else looking at bombed out retail sector?
Post by: LanceSanity on August 27, 2017, 02:34:04 PM
Build-A-Bear (BBW) could be a good bet given the share repurchases.
Title: Re: Anybody else looking at bombed out retail sector?
Post by: JayGatsby on August 27, 2017, 02:56:24 PM
Build-A-Bear (BBW) could be a good bet given the share repurchases.
I was looking at this one a week or so ago (before the repurchase announcement). It feel into my bucket of companies of "growth" retailers that are tough to value. Free cash flow over the past few years has been pretty minimal as they seem to both open and close a lot of stores.
Title: Re: Anybody else looking at bombed out retail sector?
Post by: Cameron on August 28, 2017, 12:58:01 PM
I've found success with micro-cap retailers that are trading way below book value that quick ratio's remain stable.
Title: Re: Anybody else looking at bombed out retail sector?
Post by: seshnath on August 29, 2017, 03:50:22 AM
Maverick Capital has an interesting essay on "Retail Shorts" in their 2016 letter. Skip to page 9:
http://www.superinvestorbulletin.com/2017/03/20/maverick-capital-q4-2016/


What did they mean by the Omni Channel short?

I'm betting baby clothes will work well too...

I believe they are talking about the fact that brick and mortar is moving towards e-commerce and vice versa and hence, retail short becomes Omni Channel Short now.  Essentially when you short a brick and mortar retailer, you are shorting their omni channel short as well, no?

Baby clothes is interesting.  I read recently on Kitex Garments in India, second largest capacity wise in infant wear - the CEO was saying about how babies grow fast between birth and two years of age and the birth rate is pretty much constant in the US and back up to the almost pre-2008 levels.
Title: Re: Anybody else looking at bombed out retail sector?
Post by: DooDiligence on August 29, 2017, 07:54:27 AM
Maverick Capital has an interesting essay on "Retail Shorts" in their 2016 letter. Skip to page 9:
http://www.superinvestorbulletin.com/2017/03/20/maverick-capital-q4-2016/


What did they mean by the Omni Channel short?

I'm betting baby clothes will work well too...

I believe they are talking about the fact that brick and mortar is moving towards e-commerce and vice versa and hence, retail short becomes Omni Channel Short now.  Essentially when you short a brick and mortar retailer, you are shorting their omni channel short as well, no?

Baby clothes is interesting.  I read recently on Kitex Garments in India, second largest capacity wise in infant wear - the CEO was saying about how babies grow fast between birth and two years of age and the birth rate is pretty much constant in the US and back up to the almost pre-2008 levels.

Makes sense, thanks.

Carter's Q2 2017 net sales were up 8% & operating Income was up 2% with EPS up 10%.

Most of Carter’s growth in sales came from US retail which are up 11% over last year IN A HORRIBLE ENVIRONMENT and this allows them to take advantage of their operating leverage.

Bricks & mortar comps are up with dual store format (Carter's / Oshkosh) leading the way.

1st Half Year net sales & gross profit up 4% in a highly promotional market & management is guiding up 4% to 6% for 2017 with $300m to $325m in OPCF & around $90m in CAPEX with most of the companies FCF to be generated in the last half of the year.

Inventories are up 4% over last year which indicates to me that the inventory sourcing & management initiatives are going according to plan & the new distribution center in Braselton, GA is running nicely.

Debt went up due to working capital needs in the wake of the Skip Hop purchase & the continued capital return program (should be somewhere around $400m in LT senior unsecured (2021) notes out there with the remaining $266m in revolvers.) In 2013, Moody’s rated them Ba2 stating “The Ba2 rating assigned to the senior unsecured notes reflects their junior ranking positive vis-à-vis the company's $375 million senior secured revolver which has a first lien on substantially all domestic assets of the company.” (I don’t have access to more recent ratings & I’m not a debt guy anyway so I’ll stick with the equity…)

Carter’s is successfully expanding their store count while competitor Gymboree is in BK and will close a ton of stores over the coming months & is planning to open 200 more stores over the next 4 years with most in the co-branded format.

(http://www.uglymule.com/images/carters-store-count-2017.png)

I was thinking that Carter’s would be able to capitalize on Gymboree’s closures but a question by Janet Kloppenburg with JJK Research at the Q2 2017 earnings call put the kibosh on that.

Janet Kloppenburg - “And just lastly, with the announcement by Gymboree of closing 330 stores, I think probably that those stores will be closed over the next couple of months, I'm wondering if you see any positive impact to your business?”

Richard Westenberger - “Your question with respect to Gymboree, we've taken a look at all of the site locations that they disclosed as part of their bankruptcy. And many of those locations are in high-priced mall locations, that's not part of our real estate strategy. There are some centers that may provide some opportunity. But I'd say by and large, their real estate strategy was very different from ours. Most of our stores are in high-value open air strip centers, and we've had good success with that. The economics are much more attractive for that store model relative to the mall model.”

In addition to a better real estate strategy, Carter’s management has been laser focused on getting e-commerce & omni-channel & it shows with online sales growing by 27.6% (representing 23% of total net sales which is up from 20% last year.)

This is excluding Amazon revenues which are booked as wholesale.

Carter’s designed the “Simple Joys” multi pack essentials replenishment brand exclusively for Amazon Prime customers.

Amazon commits to the merchandise & Carter’s delivers to distribution centers weekly (management won’t break out the Amazon numbers specifically but said they’ve been “scrambling the jets” to get product to them.)

Wholesale (which has been in decline) grew 1% primarily due to the addition of Skip Hop  (excluding Skip Hop, wholesale declined 6%) & operating profit declined slightly, reflecting a difficult wholesale environment & increased bad debt provisions in wholesale.

All in all, Skip Hop added 4% to year over year (YOY) net sales growth for the company & management expects wholesale to grow in the low single digits this year as a result of the purchase of Skip Hop.

Management has been aware of the declines in wholesale for some time now & appears to be making the right moves to bolster the business & in boosting DTC for the future as wholesale continues to put up somewhat dismal numbers.

Carter’s has key relationships with Kohl’s, Babies R Us, Macy’s Walmart, Target & of course Amazon (which just started up this year.)

Their mall based big box wholesale business has been downsized (management called it “right sized”) to about 13% of their business.

Management believes that wholesale is a valuable link in their omni-channel strategy as evidenced by the purchase of Skip Hop. Before being acquired by Carter’s, their products were sold through wholesale & e-commerce. They expect $90m to $100m million in sales from Skip Hop for 2017.

Another bright spot in wholesale is in international which was up 28% & helps compensate for shrinking business in the US.

International sales up 15% (19% constant currency) with Canada & China leading the way.

Canadian sales up 9% with SSS up 5.9% (Canadian e-commerce up 47%)

Carter’s now has 25 stores in China with Pau Sheng (Carters retail partner) opening 50 new Carter’s stores this year in China.

Retail & wholesale in China are lumped together in financial reports so it’s kind of hard to break out unit economics here but the business has been experiencing an operating loss in China due to start up costs & unexpected higher wholesale bad debt provisions.

Carter’s management see’s China as an $80m to $100m biz in the next 4 years with expanding margins as they achieve the scale necessary to take advantage of operating leverage as they’ve already done in North American retail.

Management is forecasting China sales to increase 50% this year which should go a long way towards achieving profitability in the potentially explosive market (they’re making a lot of babies over there!)

Carter’s management had some interesting China macro views in the most recent quarterly earnings call. They’re seeing lots of excess manufacturing capacity in China which is playing in their favor. Wages are still under pressure although not in as much as recent years. Cotton is up modestly. Overall not a bad environment for Carter’s.

There will undoubtedly be a few hiccups in the China expansion but management is moving at a measured pace & is successfully integrating omni channel through their presence on TMall, Alibaba’s online channel.

Carter’s international e-commerce sales are up 17% with Canada & China being the main drivers.

A few key international e-commerce partners are Zalando.com in Europe, Riachuelo in Brasil
& of course TMall in China (BTW, Richuelo means “small stream”)

Overall, management is targeting $4B in annual sales by 2020 with expanding margins.

They have a proven track record of maintaining growth & profitability (and more importantly free cash flow (FCF) in a heavily promotional industry where the bodies are mounting & I believe they’ll continue to perform well until the retail clothing industry normalizes again, at which time they could boost their growth significantly.

On another note, although I wouldn’t necessarily call Carter’s a compounder, they have returned over $1.2B to shareholders over the past 10 years, mostly through tax advantaged share repurchases (that amounts to nearly 30% of todays $4B market cap, not too shabby…)

In the 1st half of 2017, the company continued their commitment to shareholder returns & bought back another 1,131,409 share for $98m (an average of $86.82 per share.) There’s still $176m remaining under the current share buyback authorization.

(incomplete writeup)
Title: Re: Anybody else looking at bombed out retail sector?
Post by: JayGatsby on September 13, 2017, 02:11:57 PM
http://www.theonion.com/article/tj-maxx-recreates-store-shopping-experience-new-we-56925
Title: Re: Anybody else looking at bombed out retail sector?
Post by: Jurgis on September 13, 2017, 02:47:36 PM
http://www.theonion.com/article/tj-maxx-recreates-store-shopping-experience-new-we-56925

This is soooo cool.

(http://i2.kym-cdn.com/photos/images/newsfeed/000/264/200/acb.jpg)