When I was a kid the retail landscape was much different than it is today. We didn’t have Walmart, Target, and Costco. My favorite store was Childworld of course, but that was for special occasions. My Mom loves to shop; even dragging three little kids around didn’t slow her down. G. Fox, JCPenney and Sears generally meant clothes shopping (the worst!). Zayre, Kmart, Caldor, Bradlees and Ames offered some hope because they had toy departments.

 

Not much is left anymore. Macy’s took over G. Fox. Sears merged with Kmart, but when you add two negatives, you just get a bigger negative. It’s good to see Craftsmen, one of the crown jewels of Sears, is still around. While researching Stanley Black & Decker in Dividendville we found the Craftsmen brand alive and well. Caldor, Bradlees and Ames have all gone away and JCPenney is hanging on by a thread.

 

Zayre went away too, but that’s where a new chapter began. They were one of the leading discount retailers based in Framingham, MA. At one point Zayre tried to buy Marshalls, the off-price retailer of apparel and home fashions, but things didn’t work out. So, Zayre did the next best thing; they hired Marshall’s General Merchandising Manager Ben Cammarata away from Marshalls and built their own off-price retailer called TJ Maxx (TJX). They had an interesting business model where they went  around to the large luxury brands such as Calvin Klein, Ralph Lauren, Gucci, and Versace and offered to buy all their merchandise that didn’t sell during the season for one lump sum (typically a cash transaction). TJ Maxx would then ship the merchandise to their stores and sell them at a marked down price. If you missed your opportunity to buy a black t-shirt with a white Calvin Klein logo across the chest for $79, then check TJ Maxx because they might have bought a whole bunch of them for $5 and are willing to sell it to you for $29.99. A savings of $50!

 

Want luxury brands on a shoestring budget? Jump in your used Beamer with a leaky sunroof and head over to TJ Maxx for some Ralph Lauren sunglasses, Gucci watch, and a mustard yellow Versace shirt with matching lime green pantaloons. Oh and check out the Valentino Garavani black leather studded shoes while you’re there. You don’t need to worry about being spotted buying discounted Gucci at TJ Maxx because it is so crowded no one will ever know you’re there. You’ll never have to deal with crowds at the Versace boutique, the desperate salesperson will happily sell you any one of the twelve items off the shelf. The New York Stock Exchange is where I prefer shopping for high quality brands at attractive prices.

 

Sorry for the tangent. Back to the story. Ben Cammarata launched his first two stores in Auburn and Worcester, MA and TJ Maxx has not looked back since. They have grown like wildfire and have almost 5,000 stores. Eventually TJ Maxx got their way and successfully acquired Marshalls in 1995. They’ve also added several more brands to their lineup including Homegoods, Sierra, Winners, and Homesense (my wife loves this place).

 

TJ Maxx is my mother-in-law’s favorite store and that’s why we have her stock portfolio loaded with TJX stock. The gains in the stock and the dividend payments almost offset her TJ Maxx purchases. TJX is a very well run company and financially disciplined. They have zero debt and earn very high returns for their shareholders. Difficult times fell on TJ Maxx during the pandemic when all its stores were shut down. It was a great time to buy their stock because Mr. Market priced it like the pandemic would carry on forever and the doors would never open again. If you took advantage of Mr. Market’s generosity, you would’ve been rewarded handsomely because the stock has more than doubled since 2020. They are firing on all cylinders again and reported a very nice quarter last Wednesday night. A little caution is needed as TJX is at new all-time highs and Mr. Market is wildly optimistic on its prospects.

I have no idea if the Clorox spill is in aisle 3 or 33, but there was a mess at Clorox (CLX). CEO, Linda Rendle is doing her best to clean it up, but like most spills they get into areas you least expect. That’s what happened to Clorox. They had a nice run during the pandemic when they couldn’t keep their Clorox sanitizing wipes on the shelf. When supply couldn’t keep up with demand YouTube came to the rescue with videos on how to make your own sanitizing wipes using 91% isopropyl alcohol. When isopropyl alcohol disappeared from store shelves, Uncle Jimmy’s moonshine distillery suddenly got popular.

 

Like many manufactures of pandemic essentials, Clorox dealt with inventory issues (undersupply to oversupply). Beyond the hero to zero situation in the Clorox wipes department, Linda had to deal with a difficult operating environment. Supply chain issues such as factory shut-downs, long cargo ship delays and limited staff at the ports. Then inflation kicked in due to higher fuel prices, raw materials, and labor. While dealing with the same issues as her peers, she was blindsided by a cyber-attack that took her systems offline. This was a massive undertaking and costly as she had to get rid of the hackers, rebuild the systems, and install a new cyber security system. Don’t feel too bad for her as  she was fairly compensated for her trouble ($11.4M in 2023); slightly more than the porter cleaning up the spill in aisle 3.

 

Great companies tend to be very resilient. They can weather the storms and eventually come out on the other side. Clorox has been around since 1913 so this isn’t the first time they’ve seen difficult times. It’s their strong relationships with retailers and wonderful brands like Liquid Plumr, Pine-Sol, Brita, Fresh Step, Glad, Hidden Valley Ranch, Kingsford and Burt’s Bees that allow them to continually innovate and maintain their market leadership.

 

 

There is still some work to do to turn the company around. Sales are still flat to down, but they are still producing solid cash flow and earning decent returns on their investments. If you remember the Dividend Aristocrat list from last week, then you’ll be happy to know Clorox is a member of this exclusive club that has been paying and raising its dividend for 25 years. Clorox is one of the more exceptional aristocrats on the list as they have been raising their dividend for 46 years. That means they had to pay and raise their dividend through difficult times such as the Black Monday crash of 1987, the Dotcom bust of 2000, the 2008 financial crisis and the 2020 Pandemic. That’s a company committed to their dividend program. If you think the worst is behind them, then you might want to take a closer look at CLX.

I'll be kicking off the Spotlight Stock Reviews series on Monday, September 16th at 6:30pm with a presentation on Costco Wholesale (COST). Costco is one of my favorite places to shop and also a business I admire. During the presentation you will learn about Costco's business model, competition, moats (competitive advantages), management, financial track record and a fair price to pay for the stock. Spotlight Stock Reviews will take place once a month, generally last one hour and are delivered live through Zoom. The cost to attend is $15 per month. 

My first real job out of college was with United Technologies’ Otis Elevator. If there is such a thing as winning the manager lottery, then I hit the jackpot. My manager Rob took me under his wing, showed me the corporate ropes and challenged me both professionally and personally. It’s almost as if he carried a notebook and jotted down all of the positive things I did because they always showed up in my annual reviews. For some bosses reviews are an afterthought, but for Rob they are a priority and he puts a lot of time and effort into them. I looked forward to my reviews because he always took me out to lunch. He highlighted all the things I did well over the past year, but he also presented the things I needed to work on. My biggest challenge was public speaking so he never missed an opportunity to put me in front of a crowd. He really caught me off guard one Friday afternoon when he pulled me aside and told me our department was training all the maintenance supervisors next week and I was one of the trainers. I told him I wasn’t even working on the software project and he said,  “I know! That’s why you have a week to prepare.” I wasn’t too happy with Rob for the rest of the weekend, but on Monday morning I started learning the software and figuring out how to teach it. The first couple of training sessions were pretty rough and I was really nervous but by the end of the week I found myself almost enjoying it. Had it not been for Rob forcing me to face my fear of public speaking, I probably wouldn’t be teaching investing today. Rob is an amazing manager and an even better friend.

 

Despite getting laid off from Otis after seven years of service I still admire the company because I learned a lot about the elevator business and worked with lots of really smart people. The best part is they paid for my Master’s degree and even gave me 100 shares of stock upon graduation.

In 2020 United Technologies merged with Raytheon and formed Raytheon Technologies (RTX). In the process they spun out Otis Elevator (OTIS) and Carrier (CARR) into separate companies. I still think Otis is a wonderful business. They are a market leader in the elevator industry and a very well run company which led me to buy a share of OTIS stock for $94.60 in the Itty Bitty Portfolio. I also scooped up another share of GOOGL at $164.00. You can see all the Itty Bitty holdings .

 

Remember all companies discussed in the Navigator are for educational purposes. Please do your own homework or consult a financial advisor prior to buying or selling any stocks.

 

Cheers!

 

Brian