ferret's stock to watch: colorado group ltd

Ferret's Stock to Watch: COLORADO GROUP LIMITED
08:37, Wednesday, 9 March 2005

CHIEF EXECUTIVE LOOKING FOR 30PC GROWTH IN FULL YEAR

Sydney - Wednesday - March 9: (RWE Aust Business News)
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OVERVIEW
********

COLORADO GROUP LTD has not shown any great form in the
sharemarket since Christmas despite the company being on the shopping
list of some of the most distinguished fund managers.

Perpetual Trustee has lifted its stake to 10.34 per cent, while
last October AMP held 5.26 per cent.

Barclays has increased its interest from 7.2 to 8.3 per cent.

But the interim report was a ripper which showed earnings for
the December half 159 per cent higher at $13.7 million.

The national footwear and apparel retailer and wholesaler also
reported total sales of $208 million, an increase of 8.1 per cent from
the previous corresponding period.

Earnings before interest and tax (EBIT) increased by 129 per
cent to $19 million, and interim dividend was 6c per share, up from 3c
last year.

Managing director Rowan Webb said the group had realised the
benefits of a strong $A in the period, and had experienced better than
expected retail conditions late in the season.

Mr Webb said each of the group's five divisions had contributed
positively to the result and are tracking ahead of internal forecasts.

"In the group's retail segment, comparable store sales growth
across the group exceeded internal expectations at the mid single digit
level with the Jag division topping the company charts with continued
double digit growth," he said.

"Our two biggest divisions, Williams and Colorado, continued to
set the standard for company performances but all businesses showed
strong earnings growth in the period."

Mr Webb said Mathers had turned in a promising first half, with
its interim performance indicating the division is headed back on track
after a below par result in the prior year.

"While Mathers is still not performing at its potential, early
signs of an upward trend are emerging.

"We are confident that recent changes to product, store fit-out
and people will help Mathers build on this momentum for the remainder of
2004/05."

"Diana Ferrari retail continues to present exciting growth
prospects for the group and we remain confident in the potential of our
retail concept stores which feature both apparel and footwear," Mr Webb
said.

Mr Webb said that the group's retail segment continued to be
affected by aggressive competitor discounting but margins held up
strongly with the healthy $A exchange rate.

Sales late in the period were buoyed by government budgetary
initiatives.

Mr Webb said that sales in the group's wholesale and licensing
segment (Diana Ferrari and JAG divisions) had begun to produce
consistent results following adjustments to the wholesale business
strategy in the previous year.

"Diana Ferrari is performing above expectations, enjoying
greater sales consistency and stronger margins and enters the second
half with a very strong order book," he said.

"Jag wholesale sales were on target and licensing income was
growing strongly reflecting the improving health of the brand.

"This first-half result is a tribute to our home office,
warehouse and field teams who were able to achieve such a powerful
result, despite the implementation of our Cornerstone IT project and the
highly competitive retail environment," Mr Webb said.

"After many months of planning, we launched the first phase of
our technology infrastructure upgrade last month with the introduction
of the Tier One RETEK Retail Merchandising System (RMS).

"Aptly titled 'Project Cornerstone', this complete overhaul of
our existing systems will assist our operating divisions realise their
true productivity, and enable us to readily integrate future
acquisitions into our business," he said.

Mr Webb said that COLORADO Group is positive in the outlook for
the remainder of the year, although more conservative growth rates are
expected, given interest rate uncertainty, petrol prices and the reduced
benefit of the $A.

He believes the group was on track to exceed its full-year
projection of NPAT growth in the 20 to 25 per cent range, and now
expected growth to exceed 30 per cent.

"COLORADO Group is primed for growth - we have the right team of
people, infrastructure and business strategy to build sustained growth
and long-term success for the company and our shareholders," Mr Webb
declared.

SHARE PRICE MOVEMENTS
*********************

Shares of Colorado yesterday crept up 1c to $5.71. Rolling year
high has been $6.58 and low $3.96. Dividend is 19c a shares to yield
3.33 per cent.

Basic earnings per share reached 15.2c, compared to 6c last
year. Diluted earnings per share was 14.9c compared with 5.9c last year.

The cash flow related to operating activity was $10.2 million
against $5.141 for the previous comparable period.

EPS is up from 6c to 15.2c while NTA is $1.07 against 78c
previously.

The principal retail operations of Colorado, Mathers, Williams
the Shoemen and Jag enjoyed a strong six months, with sales growth of
just over 10 per cent.

A good proportion of this growth was also reflected in the
mid-single digit comparable store sales growth figures.

Stronger retail trading conditions and a stronger Australian
dollar were key contributors to the latest increase.

The wholesale and licensing operations of Jag and Diana Ferrari
posted consistent sales on prior year, whilst continuing to position the
brands for future growth.

Long-term growth
****************

Long-term, sustainable growth continues to be a priority for
COLORADO Group.

"Now, looking toward the challenges of an aggressive retail
environment, we believe we are better positioned than ever before to
build, enhance and protect the value of COLORADO Group's brands," Mr
Webb said.

"As we grow, our very real challenge will be not to lose the
essence of COLORADO Group - the spirit and the culture that sets us
apart - and to protect the long-term value of this company."

In 2004/2005, COLORADO will work towards extending its customer
base and increasing market share to sustain its business long-term.

"We will continue to leverage the benefits from our existing
retail wholesale formats and, at the same time, look to accelerate
growth through continued store rollouts and strategic acquisitions."

Other initiatives include:

* $7 million capital investment in IT infrastructure, brand
development through an additional $4 million in marketing, upgrading of
store shopfits for Colorado, JAG, Diana Ferrari and Williams to enhance
customer experience, and new 'discount centre' footwear format.

* To support its brands and customers, COLORADO will be focusing
on retailing strategies that will bring greater discipline to how it
runs its business and manages growth. Recognising that operational
excellence will underpin quality growth, it is building a dynamic
infrastructure to continually improve its ability to serve customers.

* This year the company initiated a project to implement a new
Retail Merchandising System (RMS) with greater capacity to manage the
added pressure of its Diana Ferrari and JAG acquisitions. This
investment will give COLORADO sufficient capacity to manage its growth
for the foreseeable future.

"With this in mind, we plan to spend an estimated $10 million
improving every area of our operations to provide opportunities to lower
costs and increase efficiencies," Mr Webb said.

BACKGROUND
**********

Colorado was listed in December 1999.

Many people don't realise that the Colorado Group is actually
one of Australia's oldest footwear businesses, with a heritage dating
back more than 135 years.

Given the energetic and progressive nature of the company, this
is sometimes difficult for people to believe.

It also comes as a surprise to discover that the Colorado brand
is not American, nor was it an initiative of the previous US parent
company.

Colorado is a specialty retailer and wholesaler of clothing and
footwear.

It has five divisions: Colorado, Mathers Shoes, Williams the
Shoemen, Jag and Diana Ferrari.

The underlying strategy to build a formidable portfolio of mid
to upper middle-market brands is central to the company's success.

In-house brands and private label program helps insulate the
company against a market which is increasingly competing on price and
ensures some level of margin protection.

The addition of the JAG and Diana Ferrari brands during the past
few years has reinforced the company's commitment to this strategy and
provides it with opportunities to accelerate growth.

ENDS

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I don't hold CDO