TRS - The Reject Shop

[Clansman]

..... No they won't.

 

[Clansman]

Allensford will either have to drastically raise their bid from the current low-ball, I'm screwing with you, price or else someone else will take it from them.

They'll soon learn to not be so greedy. People aren't stupid. I mean, telling TRS shareholders that the business is terrible but they really wanted it... seriously? Have they workshopped that strategy or got it from watching kids playing?

Here's something interesting... Seeing how it's unlikely that TRS is going broke, even under the current/coming retail crunch. As a going concern, over the medium term TRS is worth at least $6.89... that would give investors, on average, an 8%p.a. return.

Unless everybody shops online for everything... and Australia does have the internet for a couple decades now... TRS have shown they could manage their earnings surprisingly quite steadily.

At $6 to $7 for that 8%p.a. returns folks.



If I'm a chartist, and I guess I kinda am seeing how I can read charts better than tables...

Noticed how for every year since 2013... whenever the earnings slide or gain, the algo's valuation and the market's pricing goes the same way?

Except for FY 2018 where the business performance goes up but the market price goes down.

So either today's market can see the doom that's coming a year ahead, or they're behind the curve. And this curve they really shoot through the floor post the FY18 results release.

The Xmas season might be as anticipate, but the market might see that things aren't that desperately bad.


View attachment 91237


For historical comparison, below is The Washington Post.

Buffett bought all his ~10% in it by mid 1973.

According to Buffett, the stock was depressive and he got in at about $100m cap when it ought to be some 4 to 5 times that.

Business improves after he got in but still the market price drop [note the orange arrows going down].

I think Kay Graham bought stocks back and also split it couple years after Buffett bought... but share price picked up.


So if we believe that analysts are generally brilliant forecasters, or they're missing the actual company's results and tar TRS with the general retailing environment at the moment.


View attachment 91239

They are screwing with you..... but not in the way you think.

 

[luutzu]

One would think the post Christmas results, will give an indication of how the business is travelling.
I haven't noticed a change in customer traffic, at the two that I walk past on a regular basis.

Same same as a year ago Homer?

I saw a couple nearby and thought it's busy enough. They weren't empty... and the larger one in the bigger centre was quite crowded, but that could just be the timing.

 

[luutzu]

..... No they won't.

They won't raise the price?

You might be right there.

and that's why they'll lose this battle.

 

[luutzu]

They are screwing with you..... but not in the way you think.

Please explain.

I can't remember any case where a down stock got a takeover offer that failed doesn't go back up again.

Analysts and the market tend to take a closer look and figured there might be something in it. But then that could be just me talking.

 

[Clansman]

They won't raise the price?

You might be right there.

and that's why they'll lose this battle.

Let me guess, you're going to punt $5 on them losing the battle?? Lol

 

[luutzu]

Let me guess, you're going to punt $5 on them losing the battle?? Lol

Battle already lost before it even began.

There are smart people out there. Some of them have money too.

You think they wouldn't outbid Allensford for TRS?

You try buying an established retailer with strong balance sheet, $800m in sales for... yah, for $80m.

Forget the franking credits, the brand, the warehouse and logistics... one could earn a fair chunk of change just shifting the payables a week or two back on that kind of revenue.

 

[Darc Knight]

There seems to be certain people who just like to argue, bait and taunt Luu. It's amazing, they get politely proven wrong but still choose to taunt and bait. I'll bet these idiots haven't seen a tenth of the hardship Luu has, yet probably aren't a tenth as compassionate and good hearted as him.
I'll leave it there as this is supposed to be a civil forum.

 

[bigdog]

https://www.livewiremarkets.com/wires/the-riddle-of-the-reject-shop

The Riddle of The Reject Shop

Jeffrey Tse View the contributor's profile page
Forager Funds
9th January, 2019

Do you remember the first time you visited a dollar store? For me it was an exciting stop after school. My weekly pocket money felt like a fortune. I converted it into a Swiss army knife, a cap gun and an assortment of snacks. There are fewer genuine dollar stores today but the discount variety store concept is still around, mostly in the form of The Reject Shop (TRS).

Its shareholders are now considering a cash takeover offer at $2.70 per share, valuing the business at not much more than its franking credits balance. Ten years ago shares changed hands for $10 each. Same store sales were growing at an average of 7.4% a year. Returns on equity were 50%. Where has The Reject Shop gone wrong?

American and Canadian Success Stories
Some international discount variety retailers have performed extremely well over that same period. Dollarama (TSEOL) operates a network of 1,192 stores throughout Canada. Same store sales grew at an average of 6% a year over the last decade and the business is valued at $12.6bn. To put that into perspective, the market values a Dollarama store at sixty times as much as a Reject Shop store.

Dollar Tree (NASDAQLTR) and Dollar General (NYSEG) in the US have large and growing store networks of fifteen thousand each. Both grew same store sales at an average of 4-5% a year over the last decade. Together, these two businesses are worth a combined $81bn.

These examples demonstrate that the concept can thrive under the right conditions. But a closer look at their business models highlights the importance of clear price leadership and a unique customer proposition.

Dollarama has a much lower lease and wage cost base compared to The Reject Shop. It sources its products directly, cutting out the cost of the agent and providing control over product design. Its value merchandise seems to resonate with the customer base. Just look up “Dollarama haul” on Youtube and see if you can scroll through all the videos of people proudly showing off their newly purchased wares. The business spends nothing on advertising.

The US success stories also carved out positions as price leaders with a unique customer proposition. Dollar General focused on providing discount consumables to rural towns with populations too small to attract investment and competition from Walmart. Dollar Tree sells everything at a fixed $1 price point which has proven to be a compelling offering, even for middle to higher income consumers in urban and suburban areas.

The Riddle of The Reject Shop
The North American success stories provide market leading prices and a distinct shopping experience. The Reject Shop has been unable to execute as successfully despite numerous adjustments in strategy and leadership changes. Different store layouts, price points and merchandising mixes have been tested and failed.

But the number one problem is that its products simply aren’t that cheap. Most items are available at similar prices at Aldi, K-Mart, Target and even Coles and Woolworths. The treasure hunting experience is less satisfying without the payoff of a striking bargain.

Parallel importing of branded fast moving consumer goods could be the last vestiges of The Reject Shop’s competitive advantage. Rather than purchasing directly from the manufacturers, it procures indirectly from an agent based in another country. This avoids the discriminatory pricing applied to Australian retailers such as Coles and Woolworths.

Will The Reject Shop still be around in 10 years’ time?
Still, $800m of revenues is nothing to sneeze at. It’s still the first place I go whenever I need a last minute Halloween or Christmas accessory and $2 is a great price point for a tub of Pringles.

At its core, The Reject Shop has a unique proposition to work with and experiences internationally demonstrate that the discount variety retail concept can thrive under the right conditions. But plenty of discount variety retailers have gone bust.

For The Reject Shop to survive if competition continues to whittle away at its value proposition, it may need to shrink or relocate stores away from large discount grocers and discount department stores. This will be difficult with $296m of operating lease commitments. A small decline in sales can easily wipe out profits given the large fixed cost base.

For The Reject Shop to thrive, a more significant transformation would have to take place. There may be an optimal merchandising, pricing and layout strategy that management have yet to figure out.

Shareholders, though, don’t have the luxury of time. They have to choose between a certain but lowly $2.70 now, or a turnaround strategy that might never come. I’ll keep dreaming about the good ole’ days.

 

[bigdog]

ASX ANN
14/01/2019 4:07:30 PM Trading update

ASX ANN by Allensford
14/01/2019 5:37:15 PM Variation of Takeover Bid to extend takeover date to Feb 6

Herald Sun reported today

 

[notting]

You wouldn't want a downbeat 'forecast' after the bidders walk with a slightly less 'audited' result!

 

[bigdog]

Todays Herald Sun article

 

[Clansman]

Allensford hold all the cards here. Without the bid, the stock was at a 14 year low and heading well below $2 . If it's pulled, there is only 1 place this is going and it's down.

 

[luutzu]

Todays Herald Sun article

View attachment 91373

He's bluffing, and lying. Understandable, but still bs.

One, if they're serious about "informing" shareholders so they can make the correct decision, why then extend the offer to two weeks before the formal results release?

Isn't that just trying to frighten shareholders to get out before the potentially bad news hit home?

Two, if the business is so terrible, why the heck is he getting in on all of it?

Let say that TRS have a really bad year; will continue to suffer next few years... It just disrespectful of people's intelligence that it's so bad you want all of it. I mean, come on man. We're all kids here or what?

 

[luutzu]

Allensford hold all the cards here. Without the bid, the stock was at a 14 year low and heading well below $2 . If it's pulled, there is only 1 place this is going and it's down.

Allensford is holding 2% odd. That's not a full deck. They're begging to want more and so far ain't getting it.

Let me know when it goes below $2.

 

[Clansman]

He's bluffing, and lying. Understandable, but still bs.

One, if they're serious about "informing" shareholders so they can make the correct decision, why then extend the offer to two weeks before the formal results release?

Isn't that just trying to frighten shareholders to get out before the potentially bad news hit home?

Two, if the business is so terrible, why the heck is he getting in on all of it?

Let say that TRS have a really bad year; will continue to suffer next few years... It just disrespectful of people's intelligence that it's so bad you want all of it. I mean, come on man. We're all kids here or what?

I'm surprised you're so confused about whose bluffing?? Lol
The guy with all the cards doesn't need to bluff.

 

[luutzu]

I'm surprised you're so confused about whose bluffing?? Lol
The guy with all the cards doesn't need to bluff.

What cards does Germinder have?

He's an opportunist. That's good for him. But good luck convincing others, beside you of course, to hand over their shares because the company has a bad year.

From its FY18 report, the top 20 shareholders own 58.26% of TRS.

Not to insult retail investors who might not be paying much attention and could possibly be frightened into selling out into the lowest share price in 14 years [i.e. selling at a loss]... It's going to be a tough ask to get them fund managers and "sophisticated" investors to unload their holdings at a loss and on a stunt like "it's really bad, sell it to me" tactic.

Imagine if I'm one of those major holders and this douche came into my office, wake me up from my coma, and telling me the business is so bad I should sell it to him at a loss.

Yah OK.

 

[luutzu]

You wouldn't want a downbeat 'forecast' after the bidders walk with a slightly less 'audited' result!

It would be pretty easy for TRS management to legally manipulate sales performance. I hope they don't do it, but seeing how their jobs and bonuses is at stake, I wouldn't put it above them.

I mean, they could just sign up to AfterPay and such. Give loyal members 30-day credit on purchases. Lay By. Promotions, discounts.

As far as I know, TRS haven't done any of that.

They can start now and not only would it move products, increasing sales, book higher than expected profits... The risk isn't much as it's a blank slate now. ANd if it were to become bad, it'll be the new owner's problem in six to twelve months time anyway.

 

[Clansman]

What cards does Germinder have?

He's an opportunist. That's good for him. But good luck convincing others, beside you of course, to hand over their shares because the company has a bad year.

From its FY18 report, the top 20 shareholders own 58.26% of TRS.

Not to insult retail investors who might not be paying much attention and could possibly be frightened into selling out into the lowest share price in 14 years [i.e. selling at a loss]... It's going to be a tough ask to get them fund managers and "sophisticated" investors to unload their holdings at a loss and on a stunt like "it's really bad, sell it to me" tactic.

Imagine if I'm one of those major holders and this douche came into my office, wake me up from my coma, and telling me the business is so bad I should sell it to him at a loss.

Yah OK.

So you would have us believe that $18 to $2 in 6 years is just 1 bad year???
As far as convincing goes, it would seem looking at the trajectory of the SP... they were already convinced. Douche..

 

[luutzu]

So you would have us believe that $18 to $2 in 6 years is just 1 bad year???
As far as convincing goes, it would seem looking at the trajectory of the SP... they were already convinced. Douche..

Did the stock float at $18?

Has its share price been averaging $2?

No and No.

So... the price an average long-term investor would have entered into would be around $8 to $9?

If we're not in a credit tightening period with high personal debt, slow retail, bad sentiment against the sector... what would TRS normal earnings be? What would its share price be?

Still $2?

It's still a profitable business. Has practically zero debt. High cash flows. Sales at $800M [that's close to $1 billion]... and you reckon the current $65m price is pretty good. [yes, it's $65 after you take out the cash at its bank].

Here's something for future references...

A business doesn't need to "grow" to be worthwhile. It just need to remain profitable and its sales and position strong enough it won't go broke.

At a certain price, a "no growth" business is still a damn good investment.

And in case you can't see what I'm on about, just ask yourself why in the heck does a billionaire businessman is so keen on acquiring this piece of crap at current prices.

No, not so he can lose money. Maybe he's doing us all a favour, probably.