"Why Guy Spier Says Will Never Invest in Retail"
"I've always had the same impression as him, i.e. that retailing is a tough business where few of the players have a durable competitive advantage. A lot of retail CEOs who are successful at one retailer seem to flounder when they move to another retailer operating in a different market segment/environment."
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My favorite part of the interview is when they talk about retailers' real estate. Spier and John Mihaljevic both make good arguments that real-estate value gives retailers a smaller margin of safety than many people assume.
Buffett's unsuccessful investment in Hochschild-Kohn (decaying department store with signficiant RE) seems like one instance where it played out that way.
Competing with Amazon:
https://medium.com/what-i-learned-building/d233f02d52a5
Bull case on Sears: the most profitable stores are the ones in the middle of nowhere (rural America) with few/no competitors. The least profitable are ones where the real estate is valuable and could be repurposed.
Not sure whether or not that's true, but I do think you have to believe that in order to be long Sears.
Two other reasons to avoid retaining.
1. Retail margins have been declining for a century. At least. The last round of brutality has been supply chain management -- elimination of intermediaries.
2. America has more retail space per capita then anywhere in the world.
I could be wrong about both points, but even if they aren't true, they are compelling.
Guy Spier mentioned St Joe. I was involved for a while with a stock, ALICO, ALCO which is a miniature version of St Joe.
I found it compelling when the controlling owner convinced the state to build a university on his land. Where he owned the surrounding land. In the middle of nowhere.
Florida Gulf Coast University. Sometimes even being heavily connected to political power rounds to zero.
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