Regaining growth momentum-real cost of stock investment

The market appears to be valuing CCX on an ex growth basis. I suspect this is due to the loss of sales growth momentum in the FY 2023 financial year (post 30 June 2022), which is in addition to cyclical discretionary retailers being out of favour in an upward interest rate cycle.

The capital raising funds of some $110million in the 2021 financial year have largely been used to invest in inventory that increased by $130million in 2022, an increase acknowledged as being necessary to counter covid constrained supply issues.

It is the sheer quantum of the increase and size of holding of stock that is the shock factor, that is, a tripling of inventory in 12 months, notwithstanding that it was partly funded by additional trade creditors amounts owed.

However surprising this factor has been, it isn’t the main pain point. That factor is attributable to the loss of acquisition momentum, which is now revealing itself in the nil sales growth in the 2023 financial year to date.

Some growth is expected to arise over the balance of the 2023 financial year, attributable to non covid impacted trading, additional partner channel income and full year of Navabi and CoEdition. Whilst these items are useful, they will be unable on their own to drive a strong double digit trajectory, the type of growth that enables the CCX collective to exploit the $50bn plus global plus sized market management commonly points to and the core of the CCX’s global growth investment thesis.

I’d strongly encourage CCX to reflect on the current status of its growth strategy, to pivot back to a more normal stock level amount at greater speed than stated in its recent release and to use the funds generated to make good strategic acquisitions.

Dividends have been withheld for several years now; shareholders have been patient as dividend funds withheld and the capital raising funds were meant to have funded growth by acquisition, rather than where we find ourselves today, funding a bloated stock level which is accompanied by limited sales growth.

We want to see CCX back on an acquisition path of substance as a priority and for it to rightfully restate its reputation as a growth stock with enormous global potential.