Originally Posted by
Fiordland Moose
The result was pretty much as I expected.
Intriguing thing are the sales per average store during the quarter:
* Redsheds: up 1.6% on Q4 last year
* Bluesheds: down 6.9% on Q4 last year
* Noel Leeming: down 1.2% on Q4 last year
* Torpedo 7: down 13% on Q4 last year
and how do this quarters average sales per store compare to Q4 Q4 FY19? In cumulative average growth rate terms:
* Redsheds: +4.8%
* Blue: -1.6%
* Noel Leeming: up 9.5%
* TP7: up 1%
Conscious of average inflation since then, that to me sorta implies redsheds has gone well, still above the inflation adjusted trend line and could see some declines in same store sales and slack comes out of demand. Bluesheds is being annhiliated, to me looks like a segment that has been in structural decline for some time. Noel Leeming has been a firecracker for the group and shareholders over the last few years and helped produce some of those nice divies. But it also signals to me it is at risk of quite a substantial fall in same store sales growth as the work from home nesting finishes up, all that excess discretionary income comes under pressure. Tp7 an interesting one to ponder...same store sales grew 26% in Q4 FY20 (even adjusting for the extra week that quarter), fell 6% in FY21, and another 13% this quarter. Hopefully this implies it is bottoming out. Average store count increased from 18 to 23.5, just under 2 new stores each year, and new stores are immature at the beginning.
Very poor cashflow but some of that coming from a normalisation of the unsustainable prior period working capital position.
More important to keep your eye on stockturn. Trending down across all the brands but still healthy, but I'd imagine that it continues to deteriorate particularly for noel leeming.
Prompted a question on a call this morning from Jarden, who questioned the appropriateness of the dividend paid, given it will effectively be funded by more debt.
Movement from net cash to net debt position, and still have to pay out the just declared dividend.
Another question on the market, on when mgmt thought it might produce a profit. The answer was mgmt hoped it might breakeven in ~5 years from launch (so I guess that implies mgmt hope it could break even in 4 years from today given about 1 year in. I doubt it.). If I had a dollar for everytime mgmt used terms like "flywheel, ecosystem, i'd have a lot of dollars.
I enjoyed in the investor presentation they had 3 different types of NPAT, and not one of them was the reported statutory NPAT of $87m.
Again apparent there are huge legacy infrastructure and system gaps steaming from years of underinvestment which is why capex has been and is expected to remain very high (well above depreciation & amortisation excluding IFRS16 lease depreciation)
Q1 FY23 will very likely be up on Q1 FY22 given Q1FY22 was coved effected (particularly august and september, though october was clean and monthly sales in line with the previous october). Expect a triumphant announcement from mgmt and hoorays from the market when it is announced, but that is the last of the covid effected quarters of FY22. Moreover, Q2 FY22 was the strongest quarter in WHS history and will be an exceptionally tough comparable to cycle, and the most important quarter of the financial year, and my guess is will be a very tough quarter, and downhill from there for the remainder of the year.
People forget how elevated consumer demand remains (even adjusted for inflation), and reserve banks rightly or wrongly are out to bring demand down. What's equally or even more important is what is happening to gross profit margins and cost of doing business as a % of sales, neither of those ones good.
I think its very possible that 20c dividend will come under pressure in the coming years. The brightspot is the company can if they want slowdown on trying to grow the market, as a relief valve to offset other headwinds, but that's a conscious choice required of the CEO and he seems really gung ho on it.
Company has hedged expected next 12 month USD requirements by69% or another way hedged for 8 months, and at decent rates of 67c (although that will be down on FY22 so represents a GM headwind). crucially this covers the critical Q2 quarter. The problem is those headwinds turn into a gale force headwind for COGS after 8 months, where they either try to pass it all on (stiffling demand) or absorb some (stiffling margins). No doubt it will be some combination of the both.
still the company's 2nd best result. question is...where to from here. Lots of headwinds this coming year and next.