Welcome to another edition of TSOH Weekly Roundup.
Each update features a Chart of the Week, along with a brief discussion on three news items relevant to companies in the TSOH investable universe.
Chart Of The Week (from “Portillo’s: Strategic Reset”)
Three Notable Items
I recently joined the “Masters In Business” podcast at Bloomberg HQ in NYC to discuss “Buffett & Munger Unscripted” and TSOH Investment Research. A big thank you to Barry Ritholtz and Bloomberg for having me on the podcast, and I hope that you enjoy our discussion.
“Dick’s Sporting Goods Bet Big on Sneakers With Foot Locker. It Backfired.”
As I discussed in “A Position Of Strength”, success for Dick’s Sporting Goods over the past five years has largely been attributable to a much improved position in the footwear category. That development surely informed management’s decision to take on a challenging hand with Foot Locker, and they have quickly been presented with the realities of that difficult position.
I wrote the following at that time, and it seems fitting to repeat this week:
“The primary takeaway from my DKS research has been the company’s success in the Footwear category, along with the clarity of their strategy and capital allocation priorities; in many ways, it mirrors Home Depot’s experience in the 2010’s. The market views this deal as an impediment to that roadmap, and I think that’s directionally correct… While I view [the FL deal] skeptically, it isn’t something that, for me, disqualifies DKS as a potential investment.”
“On Tuesday, the company warned of lower profits for the year, saying consumers weren’t spending on footwear - which accounts for most of Foot Locker’s sales. Dick’s shares tanked, falling more than 30%, their biggest decrease on record. Ed Stack, Dick’s executive chairman, said the sneaker market is awash with inventory and rivals slapping on discounts, which has pressured Foot Locker to keep pace.”
“Heirs to the Jack Daniel’s Fortune Are Fending Off a Takeover - and a Rogue Cousin”
A topic I’ve discussed on a few occasions, with the interesting update that CEO Lawson Whiting was pushing hard for the family to consider Pernod’s offer (per WSJ reporting). Combined with the oddly worded board statement from July - “Sazerac’s proposal is not actionable” – I suspect Brown-Forman’s continued independence is currently subject to much internal debate.
“Earlier this year, CEO Lawson Whiting and George Garvin Brown IV, a former Brown-Forman chairman, explored a potential merger with Pernod Ricard, maker of Absolut vodka and Jameson Irish whiskey. Garvin Brown, who grew up in Canada, serves on the board of Wolf Pen Branch, a family investment entity that controls 60% of the voting power in Brown-Forman… When other members of the family caught wind of the talks with Pernod, some weren’t happy. Whiting pushed them to support a merger in a video call with family members... The CEO told the family that the deal with Pernod was the best thing for them and for the company.”
TSOH Updates
Here’s the updated TSOH research list for the past six months:
Monday’s research report will be an update on Dollar Tree (DLTR).
Have a great weekend!
NOTE - This is not investment advice. Do your own due diligence.
I make no representation, warranty, or undertaking, express or implied, as to the accuracy, reliability, completeness, or reasonableness of the information presented in this report. Assumptions, opinions, and estimates expressed in this report constitute my judgment as of the date thereof and are subject to change without notice. Projections are based on a number of assumptions, and there is no guarantee that they will be achieved. TSOH Investment Research is not acting as your advisor or in any fiduciary capacity.