In my opinion - to put it bluntly - the previous CEO and some of his leadership team were crap. Now TRS has a proper business man in control. Lets go back to that fateful day (24th of Jan 2014) when the share price dropped from $17.08 to $11.50. A 33% drop in just 1 day.
What happened was the investment world suddenly realised how poor the TRS strategy was - they opened 33 stores in 6 months – my god just think about that – more than 1 store a week! It was growth for the sake of growth and never mind the profit. The half year result had sales growing by 17.7% but the profit dropping by about 20%. It was haemorrhaging inefficiencies everywhere as well as burning cash.
It has taken the new CEO 12 months to straighten things out. Much more focused on making the existing stores work, increasing the bottom line and driving efficiencies. Added to this they are only opening stores after they pass a rigorous evaluation process which has added much needed discipline to the business. TRS is much more consumer focussed than previously – they now understand the TRS customer a hell of a lot better thanks to a significantly deeper dive with market research – rather than just opening a new store and hoping someone walks in. Look what the new CEO has achieved in same store sales in the last 12 months. 1st Qtr (5.4%), 2nd Qtr(1.7%), 3rd Qtr (0.2%), 4th Qtr +4.7%. The trend is your friend - I will go out on a limb and say 1st Qtr same store sales this year will be greater than 6%. This is what has got the market excited – growing sales with existing stores but also delivering on the bottom line.
The question is how much share price increase has TRS got left in it? My view – based on current information - a share price between $11 and $12 is about where TRS should be. The half year results (only 12wks away) will shed a lot more light and could easily see the price ramp up to the $16 - $18 range if it delivers on the bottom line.
I am confident the new management can deliver and will continue to hold and re-evaluate my position when the half years numbers come out.
Cheers
SLC.
TRS Price at posting:
$11.17 Sentiment: Hold Disclosure: Held
(20min delay)