Ann: KMD Brands Trading Update, page-16

Another day, another discretionary retailer saying customers are no longer coming.

Adairs, Godfreys, Booktopia, Lovisa, Super Cheap Auto, The Reject shop, Bapcor, City Chic, Kathmandu, Mosaic Brands... the hits keep coming. Even the best-in-breed, defensive consumer facing businesses such as Bunnings and Officeworks have stalled.

Most investors in the stock market - those under the age of, say, 45 years of age - have not known anything but free money sloshing through the economy and into households.

The retail sector demand-shock isn't going to be a short-lived phenomenon.
Many retail models - which were set up like the good times would last forever - are going to cease to exist.

Last time I looked this business had close to $400m in debt and leases, all having to be supported by just $50m in EBITDA (or ~$30m in EBIT, ex-lease depreciation).

The financial gearing level is intense.

Clearly, that's not great position even during the good times, but its certainly not a sustainable situation if the retail sector doldrums are not short-lived.

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