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Strategies & Market Trends : Value Investing
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To: Jurgis Bekepuris who wrote (29319)12/19/2007 8:01:54 AM
From: Mark Marcellus  Read Replies (1) of 78748
 
Hmmm, it might be time to take another look at ROST. I looked at both them and TJX a few years back and went with TJX because I thought TJX was better managed. At the time I was right, as ROST's disastrous implementation of their new IT systems proved (they actually had no idea what was in inventory for a number of months).

At least something like CWTR or CHS or TLB have brands that may be worth something. ROST? ROST is not a brand. It's the same as TJ Max or Marshall's or whatever other closeout discounter you take. It's probably better managed but that's it.

I disagree that these retailers don't have brand identity. I assume you're aware that TJ Maxx and Marshall's are owned by the same company (TJX). If the name doesn't matter, why use two names? Branding concepts for ROST or TJX may be different than, say CHS or TLB, but they still matter.

When I do look at ROST, the most important thing for me will be their inventory management. This is always extremely important in retail, but I believe it is the key differentiator for discounters. When I last looked at them, their inventory management was very weak, and I thought their extreme reliance on packaway put them at a disadvantage. At a 20% ROE, it certainly looks like they might have gotten past their IT problems and are using their systems to more effectively manage their business.
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