The question for me on the channel stuffing is not only the accuracy of the accusation, but when I try to consider this point with the facts I have in front of me, the thing I can’t shake with the company’s explanations on timings and the numbers.
Audited or not, I just can’t make sense of how it played out and it raises BIG questions marks.
Here’s how I look at what I know from ASX announcements:
- 22 September 2021 - new CEO appointment announced, commencing immediately, Estelle being an internal promotion
- 4 November 2021 - Founder officially retires, Estelle fully in charge now, but Q2 (Xmas) is locked in by that point
- 7 January 2022 - Trading update, seems like a solid half and decent Xmas, growth on previous year +30%
- 14 April 2022 - Change of CEO (Estelle fired), even with guidance is re-confirmed, blamed on location
- 6 May 2022 - Trading update, very bad one, but not substantiated and this is where it starts to not add up. They claim they re-corrected their marketing and promotional activity mid-April, but that was basically when Estelle left and they re-confirmed guidance at that point (14th April), so why didn’t they provide a trading update in mid-April when they corrected their marketing strategy? Clearly they knew there was a sales issue, otherwise no need to correct marketing strategy.
- 5 July 2022 - End of year summary breaks down revenue by quarter and two things stand out, the horrible Q3 performance when Estelle was in charge, the question here is why the numbers were so bad, it can’t just have been poor marketing?!? Do those number represent a period where certain things (like channel stuffing?) wasn’t happening? And then even more alarming the Q4 performance is absurdly good, even though the first half of April (before the change in CEO and approach) must have been very poor, so in 2 and a half months (being very generous here, as marketing changes don’t happen overnight), they absolutely smashed it and managed to get sales to a point where they just exceed last year’s revenue (+4%) and meet the lower end of the revised guidance, which is all very convenient. How they make $10m more than the Christmas quarter in Q4 when they had a shortened window after the marketing change is beyond me!
Anyway, I’ll watch from the sidelines and while I don’t know much about the former CEO claims, I can’t shake the feeling that something doesn’t add up and it could be quite substantial.
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