I'm not great with balance sheets …. but TRS had an NPAT of +$16 million (up 34%) and the share price has been pulverised
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That makes no sense to me especially given their modest Market Cap …… I agree with your assessment 100%
@luutzu … but …
The big question is ….. why has it been sold off under the current circumstances
I can have a few guesses at why the TRS is in the dumpster... I've looked into them and thought things aren't as bad as the market price indicate. That or the market will have the last laugh... which isn't the first time at my expense so that's alright
There's the high inventory, the recent release stating that sales decline but there's an abnormal drop in profit.
The inventory is higher than last year's, but not too crazy, quite modest actually. Compare inventory to sales... they both grew... ratio increase by about 1%.
The massive drop in profit from relatively weak sales figures could be explained by the changes in new accounting standards I think retailers must adopt this FY19.
TRS management wrote about this in the FY17 annual report where the new standards will mean more (accounting) expenses are recognised in the first year or two [i.e. less profit to report... i.e. less tax to pay]... but cash flow wise the business wouldn't be affected.
Retail had obviously deteriorated since, but has it been that bad at TRS? Will try to answer that....
The reason for the sell-off... in my humble opinions... could include:
1. Quite a few retailers are collapsing or doing very poorly. TRS just indicate its profit could drop 40%? Head for the exit is safer.
2. Momentum in the exit.
3. Capital losses. Buying at $5 to $7 a year ago... Even if you believe in the business, might do the accountant proud to offload those, book the loss to offset other gains... might buy back in, or might not.
4. People's calculator's working. Mine isn't.
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A few things I find interesting...
1. TRS still pay its suppliers like they've always been paying. Within 30 days.
That's both good, and bad... Good in that they're dealing fairly with their suppliers; suppliers getting paid mean you can guarantee quality/cheap supplies. You don't want to send your suppliers broke and suffer... maybe that's not too important in retails but anway... businesses will delay paying suppliers when things are out of control.
Bad in that TRS turn over its inventory in about 45 days [from memory]... A better retailer of similar size would want to push their supplier's pay to at least the same time it takes them to offload the stuff. But who am I to tell people how to run their business.
2. TRS doesn't allow credit sales, layby etc. Cash sales is always good, and safe. Them not roping in consumers with deals and credit show discipline.
3. 100 of their 360 [?] stores will have their leases re-negotiated this FY.
Given the potentially tough retail environment, it's not too much to assume that they'll use this opportunity to not renew those stores that aren't doing brilliantly. Those that do better they can negotiate a better rate... come on mate, you know it's getting tough out there, I've closed x stores and if you aren't helping...
While that might reduce the sales, which might further crash the share price... Can't ask for too much right?
Net operating cash at some $30M, zero debt, still making a profit, keeping costs down, no further capital expenditure of any significance.. selling for some $65M. I just can't help myself.