Comparing Retailer Moats
Comparing the strength and direction of the moat at WOSG, FIVE, LULU, and other retailers using the 7 Powers framework.
It’s been a tough year for many formerly high-flying retail stocks. Retail is an area that most people understand, is filled with companies that earn high returns on capital, and as such can create interesting investment opportunities. It’s also an area Buffett has famously steered clear of because of notoriously fickle consumers and how competitive certain areas of retail can become, often without warning. It’s for these reasons that the retailer space is littered with previously high-quality businesses that lose ground and never return to form, often costing investors dearly.
We study retailers and have invested in a few, but we try to be very careful of what types of retail businesses we’re willing to own. Similar to our framework for spotting value traps, we employ guardrails aimed at keeping us out of too much trouble.
In this post I’ll take a look at a handful of retailers, a few of which we own and a few that we’ve studied but have so far passed on, and the reasons why.
EPC offers separately managed accounts, low minimums, and accepts most account types (including IRAs and 401k rollovers). Qualified Clients can elect a zero management fee structure inspired by the Buffett Partnership. EPC’s clients get complementary access to our premium Substack. To learn more please email info@eaglepointcap.com.