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No. of Recommendations: 11
it just seems a combination of things:

*25% tariffs hitting this area particularly hard
*Mexico tariffs add to uncertainty
*as urbn noted in their call, after years of downturns in traffic in the store space 2018 was an upswing but it didn't last and now 2019 must compare against a good year
*persistent freight pressures - expected to tail down in 2H; if we do get a recession or slowing growth, this could turn into a tailwind
*significant labor pressures not easily reversed - this is both from states rising their minimum wages to tough labor markets in general, and many retailers have been raising wages - which can't be easily undone in any downturn
*anecdotally, but e-commerce is a particularly horrible model for retail from what seen - very few companies make money doing it, and I believe it cannibalizes customers; even the order online and pick in store can work against you
*increasing penetration of both e-commerce (amazon), subscription services, and no-profit companies (like Wayfair - great for customer, horrible for capitalists) with unsustainable business models perhaps that people are willing to fund along with growth in the major warehouse chains which suck up food traffic
*should be irrelevant, but lease changes in how things are presented on the BS

Of course, just throwing in an obvious observation: most retail management teams are dim-witted when it comes to capital allocation. In the end, buying shares when you run a no-moat business ought to be outlawed, but so many persist in doing it and attract outside 'activists' who only want to rent the stock for a few months and loot the BS. It is a tough cycle - and activists who get involved in this space can do untold damage.

Opportunities? It is hard to say - the problem with these business models is none of this is predictable, so looking thru the trash it is hard to find something to be sure about. If you want to venture, the obvious thing to do is insist on a few modest things:

*no buyback plans. Avoid any marginal retailer than does them.
*tight CapEx budgets. Really important to look over 3 to 5 years and avoid those who blow them up in good times which they often do
*superstrong BS. Cash, in other words, to give you time to wait out bad times.

I own a couple plays but with marginal dollars. It is hard to find a single no-moat one to give your confidence, but today's rotten numbers will be tomorrow's easier compares.

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