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 “Fever-Tree: Beyond Tonics”)
Three Notable Items
“The Rise of Organized Retail Crime at Big Box Stores”
An interesting discussion on the Odd Lots podcast with Scott Glenn, Home Depot’s VP of Asset Protection. As I listened to this interview, I was reminded of something that Charlie Munger once said to Chris Davis about Costco’s membership model: “I was challenging Charlie on the idea that there was a certain number of customers who would go shop at Costco if they didn’t have to be a member… It would seem to me keeping customers out of your store who would otherwise be there is a mistake… One of Charlie’s insights was ‘Think about who you’re keeping out… That cohort will have 100% of your shoplifters and it will have 100% of your thieves… It’s the intelligent loss of sales… You think that more is better, but more isn’t necessarily better’.”
29th minute: “In organized retail crime, ‘boosters’ are the people who do the stealing. They are recruited, they are given a list, and they are given the promise of money or drugs when they come back with the product. They go out and take the risk of stealing from the stores… They then take it to what we call the ’fence’, the consolidator of the product. It could be somebody’s garage, a warehouse facility, a flea market, you name it… The ‘fence’ then cleans the product [removing electronic tags, anything that identifies the retailer where the product was sold, etc.] and offers it for sale somewhere. More and more, that’s online. In the past, it included the Amazon’s and the eBay’s of the world, but since the ‘Inform Consumers Act’ was passed in 2023, we’ve seen less in those places; it has moved to peer-to-peer markets like Craigslist and Facebook Marketplace.”
Keeping with the retail theme, Ben Gilbert and David Rosenthal of the Acquired podcast released an episode about the history of Home Depot. For those who are interested in more detail on the company’s turnaround efforts in the late 2000’s, revisit the TSOH initiation, “Home Depot: Intense Focus”.
02:06:00: “What CEO Bob Nardelli missed was how important being entrepreneurial was to the company’s success… You don’t want to centralize decision-making that you can push closer to the customer… He was all about Six Sigma and operational excellence, a GE guy through and through – but operating Home Depot was not the same thing as manufacturing turbines at GE… Nardelli replaced huge swaths of the retail workforce with part-time, general labor. The whole philosophy of having knowledgeable people who can make a $0.25 washer sale that helps a customer fix their kitchen sink, which leads to something bigger down the line, was gone. ‘We’re going to bring in 16-year olds with part-time jobs just to ring the cash registers’… Before Nardelli, all the store managers were promoted up from store associates; he changes the criteria, preferring candidates with college degrees… And a couple of years into Nardelli’s tenure, customer satisfaction among HD shoppers falls to the lowest level of any major U.S. retailer.”
“30 Years of Berkshire Meetings in 60 Minutes”
Earlier this week, I joined David Barbato to talk about “Buffett & Munger Unscripted” and TSOH Investment Research. Companies discussed include Fever-Tree, Microsoft, Dollar Tree, Berkshire, and Comcast, among others. Thank you to David and to Micro Cap Club for having me on the podcast.
TSOH Updates
Here’s the updated TSOH research list for the past six months:
Monday’s research report will be an update on Dick’s Sporting Goods (DKS).
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.
The Fever-Tree chart shows a credible route beyond tonic dependence, but the estimated £193m for 2026 is still a revenue outcome. Distribution costs, promotional spending and incremental margin determine how much reaches shareholders. A broader product mix becomes more valuable when it improves cash generation as well as sales.