Due to the EBITDA guidance of 40-41m I am expecting margins to have already been affected due to discounting during the half.
The most interesting aspect for me is the cash position and likihood that the tougher trading conditions will force a draw down of the 100m debt facility to allow the continuation of the agressive La Senza store roll out.
I don't have a handle of the average fit out per store but imagine the constrained sales and margins will impact cashflow to the point that if they want to maintain their target of 100 La Senza stores within 3 years, they will need to revert to a net debt position sooner than later.
I don't see the next 18 months as easy by any means for SFH but feel the negatives are priced in at 80c per share. Also feel that having reduced the debt off the balance sheet over the last 2 years we are in as strong a position as any clothing retailer to come through this challenging period. If Perlstein elects to return to a net debt position to maintain the La Senza roll out then I am quite happy to back that position after all at least we have a management aligned to our interests via their considerable holding of scrip.
SFH Price at posting:
83.0¢ Sentiment: LT Buy Disclosure: Held
