Business Breakdowns

Today, we are breaking down the global luxury group Kering. You know Kering from its brands Gucci, YSL, Bottega Veneta, Balenciaga, and the list goes on. It's a luxury house similar to LVMH, but LVMH over the past five years is up over 40% and Kering is down over 60%. To break down Kering, I am joined by Jonathan Eng, portfolio manager at Causeway. We cover the owners and operators of Kering, the Pinault family. We also discuss wholesale distribution versus retail distribution and brand margin profiles. But Kering's core brand, Gucci, is different from much of what you see in luxury, and we spent a significant amount of time diving into it. What makes Gucci more cyclical than understated luxury? Where do we stand with Gucci today? And how does Jon think about all of this as an investor tapping into his historical context in the space? Please enjoy this breakdown of Kering. For the full show notes, transcript, and links to the best content to learn more, check out the episode page here. ----- Business Breakdowns is a property of Colossus, LLC. For more episodes of Business Breakdowns, visit joincolossus.com/episodes. Editing and post-production work for this episode was provided by The Podcast Consultant (https://thepodcastconsultant.com). Show Notes (00:00:00) Welcome to Business Breakdowns (00:00:53) Overview of Kering and Its Brands (00:02:13) Kering's Business Strategy and Challenges (00:05:02) Historical Context and Family Influence (00:07:09) Comparing Kering and LVMH (00:10:27) Financial Performance and Market Dynamics (00:18:05) Impact of Creative Directors and Brand Evolution (00:21:28) Modern Analytical Approaches in Luxury Market (00:23:29) Exploring Kering's Development Centers (00:24:36) Decentralized Decision-Making in Luxury Brands (00:25:04) Wholesale vs. Retail: Control and Margins (00:27:33) Strategic Store Locations and Investments (00:28:51) Geographical Brand Preferences (00:30:19) Balenciaga's Advertising Fallout (00:33:46) M&A Landscape and Future Growth (00:37:41) Valuation and Market Position (00:43:06) Operational Gearing and Risks (00:43:58) Key Lessons from Studying Kering

Today we have a special year-end episode of Business Breakdowns, running through some of the best ideas that were featured on the podcast. The goal of the podcast is to detail whatever business we're covering that day. But when you think about the best investors, the best business builders, they're constantly borrowing insights from the success stories that are happening around them.  We start with a high-level theme and then explore a business's life cycle, from establishing a niche with Gartner to building a culture at Live Oak to refining operations via the lens of Trane. We go through the good and bad of business transformations told through the stories of Rolls Royce and D.R. Horton. And we cover what a clean financial model looks like through Inditex. Lastly, we wrap up with management stories that are underappreciated via Motorola and Winmark. Please enjoy this Breakdowns recap.  For the full show notes, transcript, and links to the best content to learn more, check out the episode page here. ----- Business Breakdowns is a property of Colossus, LLC. For more episodes of Business Breakdowns, visit joincolossus.com/episodes. Editing and post-production work for this episode was provided by The Podcast Consultant (https://thepodcastconsultant.com). Show Notes (00:00:00) Welcome to Business Breakdowns (00:01:34) Hierarchy of Consumer Preferences (00:06:10) Gartner's Niche Beginnings (00:07:48) Operational Excellence at Trane (00:10:43) Understanding Customer Needs (00:11:46) Vulcan Materials: A Case Study (00:13:26) Logistics in Construction Aggregates (00:16:29) High-Touch Customer Experience at Live Oak Bank (00:19:33) Transitioning Business Models to Financial Models (00:20:18) Insights from Ed Wachenheim on Home Builders (00:22:14) The Case for Asset-Light Strategy (00:23:27) The NVR Model: A Success Story (00:24:10) Horton's Transformation (00:25:54) Rolls Royce: A Shift in Business Model (00:28:51) Financial Modeling and Long-Term Success (00:30:09) Understanding Payout Ratios (00:33:21) Greg Brown's Leadership at Motorola (00:37:13) Winmark's Unique Operational Approach (00:40:05) Matt’s Wrap Up

Today we‘re breaking down FilterBuy. From time to time, I come across a compelling founder who is willing to cover everything about their business and David Heacock, founder of FilterBuy, is exactly that. We explored the psychology of David's transition from Goldman options trader to starting an air filter business in Alabama just over 10 years ago. Since then, the business has grown into something that generates over $250 million in revenue as of today, 2024.  We discussed the economics of air filters, and David shared a great story about how he found this specific market and what makes it so unique. We also discussed various business considerations, like manufacturing location, logistics handling, and direct-to-consumer versus big box. It's really hard not to be inspired after listening to David. Please enjoy this breakdown of FilterBuy. For the full show notes, transcript, and links to the best content to learn more, check out the episode page here. ----- This episode is brought to you by Ridgeline. Ridgeline has built a complete, real-time, modern operating system for investment managers. It handles trading, portfolio management, compliance, customer reporting, and much more through an all-in-one real-time cloud platform. I think this platform will become the standard for investment managers, and if you run an investing firm, I highly recommend you find time to speak with them. Head to ridgelineapps.com to learn more about the platform. ----- Business Breakdowns is a property of Colossus, LLC. For more episodes of Business Breakdowns, visit joincolossus.com/episodes. Editing and post-production work for this episode was provided by The Podcast Consultant (https://thepodcastconsultant.com). Show Notes (00:00:00) Welcome to Business Breakdowns (00:04:52) Meet David Heacock: From Goldman Sachs to FilterBuy (00:06:36) The Journey of Entrepreneurship (00:12:27) The Economics of Air Filters (00:18:15) Challenges in Manufacturing (00:23:25) Building a Team and Scaling Up (00:26:51) Logistics and Cost Efficiency (00:30:23) Challenges with FBA Fees (00:31:43) Sales and Competitive Dynamics (00:32:04) Residential vs. Commercial Air Filtration (00:33:16) Retail Strategy and Market Expansion (00:37:22) Building a Brand and Logistics (00:38:09) Importance of Delivery Speed (00:39:29) Navigating Big Box Retailers (00:42:50) Vision for the Future (00:51:34) Lessons Learned from FilterBuy

Today we are covering the world of fast fashion. If you don't know the name Inditex, you certainly know Zara, the core business inside Inditex. My guest, Alistair Wittet, recently launched Aecus Partners, an equity boutique specializing in European and global equities, and has followed Inditex for decades.  He gets into how the company pivoted its business over the years from the initial store expansion, the e-commerce evolution, and what has allowed Inditex to succeed where other fast fashion peers have struggled. There are so many interesting themes here: success in no-growth industries, the power of thoughtful vertical integration, decentralized decision-making, and corporate pivots. Please enjoy this Breakdown of Inditex. Founders Podcast - #372 Amancio Ortega For the full show notes, transcript, and links to the best content to learn more, check out the episode page here. ----- This episode is brought to you by Public: Invest in stocks, bonds, options, crypto, and more in one place. A Bond Account is a self-directed brokerage account with Public Investing, member FINRA/SIPC. Deposits into this account are used to purchase 10 investment-grade and high-yield bonds. The [6.7%] yield is the average annualized yield to maturity (YTM) across all ten bonds in the Bond Account, before fees, as of [9/05/2024]. A bond’s yield is a function of its market price, which can fluctuate; therefore a bond’s YTM is “locked in” when the bond is purchased. Your yield at time of purchase may be different from the yield shown here. The “locked in” YTM is not guaranteed; you may receive less than the YTM of the bonds in the Bond Account if you sell any of the bonds before maturity, or if the issuer calls or defaults on the bond. Public Investing charges a markup on each bond trade. See our Fee Schedule. Bond Accounts are not recommendations of individual bonds or default allocations. The bonds in the Bond Account have not been selected based on your needs or risk profile. You should evaluate each bond before investing in a Bond Account. The bonds in your Bond Account will not be rebalanced and allocations will not be updated, except for Corporate Actions. – This episode is brought to you by Ridgeline. Ridgeline has built a complete, real-time, modern operating system for investment managers. It handles trading, portfolio management, compliance, customer reporting, and much more through an all-in-one real-time cloud platform. I think this platform will become the standard for investment managers, and if you run an investing firm, I highly recommend you find time to speak with them. Head to ridgelineapps.com to learn more about the platform. ----- Business Breakdowns is a property of Colossus, LLC. For more episodes of Business Breakdowns, visit joincolossus.com/episodes. Editing and post-production work for this episode was provided by The Podcast Consultant (https://thepodcastconsultant.com). Show Notes (00:00:00) Welcome to Business Breakdowns (00:06:52) Overview of Inditex and Zara (00:09:46) The Fast Fashion Model (00:14:27) Origins and Expansion of Inditex (00:17:22) Navigating Financial Crises and E-commerce (00:22:30) Supply Chain and Inventory Management (00:24:32) Revenue and Growth Dynamics (00:29:48) Margin and Cost Structure (00:35:35) Inditex's Financial Management Strategies (00:36:20) Impact of COVID-19 on Inditex's Margins (00:37:13) Free Cash Flow and Inventory Management (00:39:43) Competitive Landscape: H&M and Shein (00:42:57) The Role of Culture in Inditex's Success (00:54:51) Sustainability and ESG Concerns (00:58:43) Investment Insights and Risks (01:00:40) Key Lessons from Inditex