Unfortunately the worst fears of managerial incompetence have...

Unfortunately the worst fears of managerial incompetence have been realised here, just short of something more catastrophic.

Results reported reveal the true extent to which Avenue was operating beyond and out of the control of the Sydney based management team; a brand bleeding cash locked into logistics legal deals which consumed all of the gross profit made on trading, overheads uncovered and therefore near fatal on cash burn basis. The buyer FBB is collecting these brands, unlike CCX presumably has sufficient scale to make it work. CCX couldn’t and a disastrous outcome in the end. Results from Sycamore owned Torrid were strong. Shein is killing it. That is, the competition is doing well and therefore the ‘market’ whilst challenging is being navigated by the competition pointing to poor management and loss of focus at CCX.

At best events that have transpired indicate the Board sat on bad news hoping things would turn at some point, perhaps stooged by management that everything was under control when it wasn’t. Avenue standalone impact to net results buried in the releases when it should not have been. Lack of transparency never works in the end.

The likes of Ord M now say worth 17c a share. Its ultimate value depends on the extent to which the brand grows capital light, particularly in the USA being is prime focus. Management believes it can do this in a way that is counter to the direct drop ship Shein approach, which remains free of US Senate duty impost curtailment; that is, by import in and warehousing at a 3rd party logistics provider compensated on a variable volume basis.

Performance metrics in the slide pack show an uptrend for the CcX brand and promising early results from the switch to style of marketing, better product and lower discounting focus. It remains a minnow in the US and the overall market size tells us it can inherently achieve substantial growth from its current base of sales, should it be successful. Private equity loves these types of investments where the cancer has been excised out, costs rebased and strategy simplified and reset. What we have here is somewhat the same investment thesis playing out on a public market.

Cost take-out from Australia not done yet, something like $10 million short to achieve 17% historical EBITDA margins allowing for gross margin improvement of another 3% from recent trading as the’ve indicated regarding the 62% target gross margin. Suspect there’s a bunch of stores losing money impacting this number. Captain B is right on margin reset.

Once cadence achieved in the US, roll out to next market and on it goes. It ain’t that complicated. Let’s start making f#ing money.

Jobs; “it’s the product (stupid)”