"in fact they should increase the number of stores .... look at...

"in fact they should increase the number of stores .... look at the new shopping hubs westfield s opening in new surburbs !"


They have been increasing the number of stores for over a decade.

But that hasn't prevented the share price from falling from over $17 to $2 (before the takeover approach).

And the reason for that is, its been a case of rolling out new stores, not for profit maximisation, but merely for the sake of it.

Group EBIT is today less than half of what it was a decade ago ... despite capital expenditure - most of it being for new stores - totalling some $220m (that's equivalent to $7.60 per share!!) over that period.

Here's the problem, in a picture:



EBIT per store is today one-quarter of its level a decade ago!
With it, ROE has gone from 48% in FY2009 to less than 10% today!

The shareholder value destruction has been simply eye-popping.

Self-evidently, what they should be doing is not rolling out new stores, but shutting down unprofitable ones, as well as those that don't earn their cost of capital.

And there will be plenty of those.