Ann: Change in substantial holding, page-9

"What is really driving this up?"

It's really quite simple.

For a decade, this company's managers thought their job was to roll out new stores as fast as possible, with scant regard for the somewhat important matters of profitability and return on capital.

Years of poor allocation of shareholder capital resulted in too many, unprofitable and over-stocked stores with too many lazy SKU's sitting on the shelves.

For context:

In 2010 the recorded Sales of $470m, on which it made $33m in EBIT

Fast forward to 2019, and Sales were around $800m.
And EBIT? Zero!
(Actually, it was a $1m loss)


Last year, a new management team was parachuted in, one whose mandate is to undo the damage of the preceding 5 years and to effectively reverse some of the poor capital investments that were made over that time.

The question is how hard this will be to achieve, and the answer is, "Not very hard at all."

There are a many levers that are able to be pulled:

- Close loss-making stores,
- Cut better lease deals with now-desperate landlords,
- Rationalise SKU's
- Bit of fresh merchandising,
- Eliminate corporate largess.

Anyone with a mere modicum of retailing nous would be able to get it right.

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