Kevin Duffy on investing in retailers

Which retailers should weather a recession best?  Those which provide basic necessities and sell things at a discount.  As the late Mark Butler, founder of Ollie’s Bargain Outlet, used to say, “America has always loved the bargain.  It will never, ever go out of style.” 

Investors should also seek companies expanding globally, occupying defendable niches or riding tailwinds, e.g. the trend towards casualization in footwear and apparel. 

Valuations matter.  Struggles at the low-end are well known and baked into stock prices, less so troubles mounting at the high-end.  As pain works its way up the economic ladder, best to steer clear of those retailers exposed to the higher-income consumer.

~ Kevin Duffy, "Dead Canary in Aisle 7: Is the high-end consumer safe?," The Coffee Can Portfolio, p. 17, June 15, 2022