In business, unless you are in a service business, volume and cash are your friends. When I talk about critical mass I really am talking about volume. The higher your sales volume the lower your fixed cost per sales dollar, or cost of manufacture if you like. As you lower your sales volume, unless you cut fixed costs, the higher your fixed cost per dollar sold increases. By selling off volume they proportionately raised the fixed cost per sale. This is where their spiral began, but they weren't smart enough to know. When they had mega volume no need to really worry, but cut your volumes by half your fixed cost per item sold doubles, thus requiring higher margins to recover your costs. I know for those who are perfectionists this is not 100 pct accurate but 99.9 pct will do me for explanation. The more volume they cut the worse it got. Then it gets into a spiral that is irreversible unless you slash. I have said before this company was salvageable two years ago, but continuing down the path they chose was irreversible 12 months ago. They lacked basic understanding of costs and recoveries. Stellar by adding this product range to their arsenal can do it by adding no extra, or minimal, cost to their structure, hence the cost per product falls. They will make Hills products profitable, assuming the product is in fact saleable, just like all the other buyers of Hills products have done in the past. The only way Hills could have made a buck in the later years was to slash fixed costs which they didn't.
HIL Price at posting:
2.3¢ Sentiment: None Disclosure: Not Held
