Own the brands, L'Oreal, EL, LVMH etc. EM and travel is where the growth is at, not the US.
One of the things that struck me from the interview is how many phenomenal growth stocks over the years have been retailers: Home Depot, CVS, Walmart, Costco, TJX, Dollar General, Tractor Supply, Lululemon, Alimentation Couche-Tard, Ulta come immediately to mind. Over most time periods, several of the best performing stocks are retailers. For example, Kiplingers has a list of the top performing S&P 500 stocks over a 50 year period. Four of the top fifteen are retailers:
4. Dollar General
7. Lowe's
13. Walgreen's
15. TJX
There is something about retail (insert past performance caveat here) that allows for long periods of sustainable growth even though retailing is very competitive and the moats are squishy at best. Part of it is the simple growth formula of SSS + store openings. Operating leverage probably plays a role too.
Obviously, retail is a terrible business. But there are a few select companies that can unlock a sustainable growth formula. I think Ulta is one of them and I think the current pessimism will create a tremendous buying opportunity. I currently have a 2.5% starter position but hoping for further weakness.
Are you able to identify any common threads among the very successful retailers that you can use to identify potential winning retailers that are still early in their growth phase? In other words, is there an underlying common business model or characteristic(s) that produces the SSS + store growth that, in turn, produces great returns on capital?
To me, the list suggests some possibilities:
1. Initial efficiency (from better logistics, management, etc.) leading to a permanent lower cost structure via economies of scale (Walmart, Lowe's, Home Depot, Costco, Dollar General)
2. A better method of sourcing products that can be used at scale (Costco, Dollar General, TJX).
3. Getting people in the door via a necessary, likely low-margin item (gas/prescriptions/new car) and then getting them to buy other stuff while they're there (Couche-Tard, CVS(?), Walgreens(?), car dealerships)
I don't know enough about Tractor Supply to have any sense of whether it is similar to any of the above. Lululemon is a brand that controls its own retail distribution via vertical integration, so I wouldn't group it with the other retailers, i.e., companies whose primary business is distributing other companies' products to consumers.
Also, given that retailing is a distribution business, you have to determine which historical examples are still relevant given the changes to distribution caused by the internet.