Even when you have high-conviction ideas, buying a stock and not looking at it for 25 years is a tall order. There are a couple of ways to approach the problem. You can pick a business whose model is built to last, one that works in good economies and bad. Or you can pick a company with a track record of adapting that has already survived a few of the things that kill retailers. Or you can look for the rare company that is both.
The one I would pick is a company that sells last season’s designer handbags next to a $7 scented candle, and has been doing some version of that since 1976.
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TJX works in booms and in busts
TJX Companies (NYSE: TJX) runs T.J. Maxx, Marshalls, HomeGoods, and a handful of other banners across over 5,200 stores in ten countries. The model is simple to describe and nearly impossible to copy: buy brand-name merchandise that full-price retailers overordered, undersold, or canceled, and sell it at 20% to 60% below their prices in a store that changes every week. The customer never knows what she will find, which is why she keeps coming back.
What makes it a 25-year stock to me is that the model has no bad weather. When the economy is strong, brands overproduce and TJX has more to buy. When the economy weakens, shoppers trade down and TJX has more people to sell to. Its sales held up through the 2008 recession and grew during the inflation-driven stretch that followed, and management has said in its annual reports that it has been gaining market share.
In its most recent quarter, with consumers under pressure and tariffs scrambling the supply chain, comparable sales rose 4%, and CEO Ernie Herrman said the availability of branded merchandise “continues to be outstanding.” Other retailers’ problems are TJX’s inventory.
A company that keeps adapting
The second test is adaptability, and TJX passes it in a way that is easy to miss because the company never announces a reinvention. It simply adds. HomeGoods did not exist until 1992; it now does $10 billion a year and grew comparable sales 7% last quarter.
TK Maxx in Europe and Winners in Canada were small experiments that are now two of the fastest-growing parts of the company, up 7% and 6%. Sierra, a tiny outdoor chain, is opening stores. Management said in August that it now sees room for 7,500 stores worldwide under its existing banners, up 500 from its prior target, and will speed up openings to 4% a year starting in 2027.
