Retail may be one of the easiest sectors for the individual investor to analyze should one go into it with one's eyes open. With a retailer, one may gather great intelligence by spending a few hours mulling around a store. Store clerks are more than happy to discuss store operations, especially if their hours have been cut, and the keen observer may gleam additional useful information by examining the product line and whether or not the product is moving or not. And if one is lucky enough to have a teenager working there, even more may be learned.
From personal experience here on the border of Mexico in Laredo, Texas, my observations from shopping my local Marshall's and T.J. Maxx (NYSE:TJX) store lead me to believe that sales at this operation are strong and will continue to be so. (The TJX portfolio of companies also includes HomeGoods, Winners, HomeSense and T.K. Maxx.) My wife is the T.J. Maxx shopper, and often comes home disgusted because that dress or blouse she wanted to wait a week to buy was gone when she went back. The product turnover is fast and furious at our stores here on the border.
Marshall's was once my favorite store because when it was first built, nobody understood its concept and it was situated on the north end of town prior to our population explosion so it not receive much traffic. Now it is hard to find a decent parking spot in the evenings and on weekends.
Laredo hosts a lot of Mexican shoppers and the cultural values here tend to lend to a great deal of “keeping up with the Garcias,” thus name brand shopping is important, just as much so as from where the product was purchased. For the longest time, a Macy’s (NYSE:M) sack carried more weight than a plastic bag from Marshall's. However, as folks here have finally settled in to the notion that the Tommy shirt and Coach (NYSE:COH) hand bag over at Marshall's or T.J. Maxx is indeed the real deal, and can be purchased for a fraction of the full retail price, both of these stores have now become “the” places to shop for smart, fashion-conscious consumers.
Marshall's used to carry fantastic house wares and objet d’art from around the world; Murano glassware from Italy, carved wooden Christmas ornaments and nutcrackers from Germany, mouth-blown glassware from Spain, Ceramics from Portugal, Swiss chocolates, Polish Crystal and Eastern European glassware, German cookware, Mikasa crystal glassware, Spode china, Chinese bird cages, African artwork, and the list goes on and on. It still has much of this stuff to some extent, but I have noticed over the past couple of years a serious shift to Chinese-made products and quite frankly, this is where I parted company with Marshall's as a buyer and began thinking about it as an investor. Much of the old product line used to be collected from boutiques across the nations that were moved on down the line as newer product lines hit the shelves.
Though my personal opinion favors a more diverse mix of products, the Chinese-manufactured goods bodes well for the store from an investor’s standpoint. The margin on these products is much higher. Rather than containers coming from all parts of the world and having to send buyers out to various market places, one container can contain products representing different parts of the world coming out of China. The logistics alone must be saving these guys billions.
We now have two T.J. Maxx stores and one Marshall's. Another reason I personally quit shopping at these stores is because I don’t like crowds. Yes, our stores seem to be crowded most of the time, and I doubt they have noticed the absence of my thin dime. Our new TJ Maxx store sits close to our new Best Buy (NYSE:BBY) out on Loop 20. T.J. Maxx’s parking lot is full on Saturdays, Best Buy's isn’t.
So as far as retailers go, the next time you are at the mall, or out at the strip mall, take the time to have a good look around. You may find more than you bargained for.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.