Michael Butler’s Post

Last month, Morrisons confirmed that it had reduced its debt by almost 40%, as the grocer pushes ahead with a host of cost-cutting measures. However, many workers and shoppers have been left unhappy with the state of stores in recent times. Its efforts to cut debts come in tandem with the grocery chain attempting to win back customers. Retail Gazette investigates whether Morrisons can successfully regain ground in the grocery sector while simultaneously cutting costs. https://lnkd.in/efi2f96p #retailnews #grocery

Bumpy road forces Ackerman family to let go of control of troubled Pick n Pay after 60 years: Pick n Pay has embarked on a restructuring plan to save its market position and claw out of huge debts, with chairperson Gareth Ackerman set to relinquish control of the South African grocer that yesterday reported a reversal of fortunes into a R1.5 billion loss. As bigger rival operator Shoprite and other competitors such as Woolworths appear to be riding out South Africa’s turbulent economy, Pick n Pay is apparently feeling the pinch of a severe financial strain worsened by its breach of debt covenants. At a time Pick n Pay is seeking to close as many as 100 stores, Shoprite is growing its market share in South Africa, disclosing recently that it added nearly 200 new stores in the half-year period to end December, bringing its total to 3 543. Market analyst Simon Brown yesterday reckoned that Pick n Pay “is in trouble and needs cash” as soon as possible. In March, the board of Pick n Pay authorised the grocer to take up loan facilities amounting to R1bn with banks such as FirstRand. As at the end of February 2024, net debt in Pick n Pay had grown from R3.7bn in 2023 to nearly double at R6.1bn. The company said this had worsened its losses as a “significant escalation in interest charges, driven by the additional funding raised and an increase in underlying interest rates over the period” weighed down on profitability prospects. Pick n Pay is putting up some of its struggling stores under franchise, although analysts said there will be fewer investors interested in snapping up stores that the company failed to run profitably on its own. But with different strategies, other experts believe the stores being disbanded can be turned around. “With some store closures on the horizon, opportunity is opening up for other chain stores with more profitable business models to take that space,” said Robin Brimer, an independent management consultant. The Boxer budget chain stores, however, presented a bright spot for Pick n Pay. In fact, the company is also pursuing a strategy to place a few other Pick n Pay stores under the Boxer chain. This comes as consumers, hard-hit by inflation and elevated interest rates, are trending down to budget retailers. Pick n Pay admitted as much yesterday, saying the “under pressure consumers (are) increasingly shopping promotions” to derive some value in light of economic difficulties. The food and clothing retailer announced this year that it will be undertaking an initial public offering (IPO) for Boxer, in addition to a R4bn rights offer. Ackerman said this was the “best approach to reinvest in our company, recapitalise the business, and reduce debt” obligations. “This will enable Pick n Pay’s management to start investing back into the business for growth,” he said yesterday. The group said Ackerman Investment Holdings had…

It’s a sure sign of distress when you have to sell assets to pay for debt interest and this seems to be the case with Morrisons who are sat on a net debt pile of £8.6billion whilst Asda has £4.2billion of debt. Both supermarket were the subject of private equity takeovers that paid for companies with leveraged debt. It feels like Thames Water all over again and we know how that has ended (or do we?) Leveraged debt buy outs should be limited to a minimum of 50% in cash so the asset strippers have skin in the game and they shouldn’t be allowed to loan against target assets. Simply put they should be subject to a loan to value of 50%. Not sure if the government is aware that they are heading for another public related issue because what happens if they both default on their debts? Raising cash through sale and leaseback of their property estates was done with Tesco’s and Sainsbury’s at the height of their issues but they don’t suffer from having private equity ownership and most likely paid down their debts! #property #debt #retail #economics https://lnkd.in/ePdDyUmS

[Debt trap. Bulk of purchase was financed by debt. Interest of R15bn = 2,3 x R6,3 bn profit generated] The debt burden created by the David Jones acquisition and subsequent capex outweighed the profits Woolworths received. In 2014, just before the David Jones acquisition, Woolworths had a total interest expense of R136 million. This changed dramatically after the David Jones acquisition, as the bulk of the purchase price was financed through debt. In 2015, a year after the acquisition, Woolworths had a total interest expense of R1.5 billion, which was R1.4 billion more than the year before. In fact, Woolworths paid a total of R15 billion in interest expenses during the entire period that it owned David Jones. This amount is more than twice the profit Woolworths generated through David Jones over the same period. https://lnkd.in/gX8yEZzM

https://lnkd.in/eANs54XD Cash flows provided by operating activities increased $20.7 million to $54.2 million in the quarter from $33.5 million in Q1-23. Free cash flows net of lease payments(1) more than doubled to reach $36.9 million in the quarter, compared to $15.4 million in Q1-23. Free cash flows net of lease payments per diluted share(2) reached $1.52 for the quarter compared to $0.63 in Q1-23. Net income attributable to owners decreased by 6% at $17.3 million, or $0.71 per diluted share compared to $18.4 million, or $0.75 per diluted share in Q1-23. Normalized adjusted EBITDA(1) decreased 7% to $59.5 million in the quarter from $64.0 million in Q1-23. System sales(3) for the quarter slightly decreased 2% to $1.33 billion from $1.36 billion in Q1-23. System sales decreased 2% in Canada and 3% in the US, while International sales remained stable. Ended the quarter with 7,112 locations compared to 7,116 locations in Q4-23. Repurchased and cancelled 70,800 shares for a total consideration of $3.6 million in Q1-24. Long-term debt repayments of $34.6 million for the quarter with a total reduction in long-term debt of $103.5 million since Q1-23. Quarterly dividend payment of $0.28 per share on May 15, 2024.

SME IPO see Manic Rise in Retail Interest Ordinary retail investors are now buying big into the initial share sales of high-risk SMEs, an exclusive HNI bailiwick until recently, seeking to benefit from the stellar listing gains these issuances have lately been generating. Statistics show that from just 511 applicants in FY21, these SME IPO drew a staggering 2,19,000 applications so far. In a bullish market, investors ten to invest in all IPOs, hoping for allotments in some, due to high likelihood of listing gains. Furthermore, the advent of trading apps streamlined IPO investment process, reducing it to just 3-4 clicks. Also, funds remain in the bank account until allotment making it an attractive option. SEBI through its cautionary advisory said that some SME companies have been employing tactics to project a misleading positive picture of their operations then capitalising on this momentum to offload their own holdings at a profit. To bring more stability to the opening price discovery process for SME stocks, NSE early July put up a cap of 90% over the offer price for SME IPOs during a pre-open session on listing day. About 60 IPOs listed between 90% and 400% above the issue price. Read more at: https://lnkd.in/gPXStusx

Pepco Group taking 'swift action to get Poundland performance back on track' as it takes a non-cash impairment charge of €775m https://lnkd.in/eQ88ERav #impairmentcharge #discounter #generalmerchandise #valueretail #retail #retailnews

Buy Now Pay Later (BNPL) provider Laybuy have filed notice to appoint Administrators today following an unsuccessful sales process and news last week that its New Zealand based parent company and Australian arm were both placed into receivership. The longer than expected economic downturn and cost of living squeeze had a significant impact on the retail sector and consumer spending which the founder and managing director said resulted in reduced sales and increased losses from defaults. These ultimately proved too much for Laybuy and cast an ominous shadow over the BNPL sector that had been booming since 2019. Laybuy were considered one of the big three players in the space alongside Klarna and Clearpay. However, translating the boom in growth for BNPL services into profits has proved tricky especially given concerns of customer defaults due to the cost of living crisis and overspending, which can easily be achieved using BNPL services. Is this an isolated insolvency or could this be the first domino to fall? The BNPL sector has come under heavy scrutiny for the ease at which a magnitude of debts can be built upand despite cries for regulation it has not been forthcoming. The latest news suggested it was being parked until after a general election amid concerns it may do more harm than good to consumers. Regulation may not have prevented the insolvency of Laybuy, but the fallout from the insolvency could have significant ramifications. I have always wondered whether the BNPL space was set for a fate similar to the payday loans sector. What happens next may dictate the trajectory of the sector in the long term. #insolvency #businessrecovery #restructuring #turnaround #business #bnpl #debt #accountant #london

Pepco Group taking 'swift action to get Poundland performance back on track' as it takes a non-cash impairment charge of €775m https://lnkd.in/eQ88ERav #impairmentcharge #discounter #generalmerchandise #valueretail #retail #retailnews

BOOHOO DIVES INTO DEBT AS LOSSES SOAR TO £160M AND SALES SLUMP boohoo has cut more than 1,000 jobs and dived into debt after its losses soared and sales slumped 13% amid heavy competition from the Chinese online seller SHEIN and the revival of the high street after the pandemic lockdowns. The online fashion specialist, which owns Debenhams, Warehouse, Dorothy Perkins and Pretty Little Thing, said it had built up net debts of £95m in the year to the end of February – down from almost £6m of net cash a year before – after losses widened 76% to £160m. Its chief executive, John Lyttle, blamed the group’s problems on “difficult market conditions, caused by high levels of inflation and weakened consumer demand”, and said it planned to make savings of £125m in the year ahead after putting more automation into its Sheffield warehouse, closing one in Daventry, and opening a new warehouse in the US. The latest accounts show that Boohoo Group PLC, which was founded in Manchester in 2006, had cut more than 1,000 jobs in the year as it faced an 11% drop in the number of active customers using its site, each of whom spent less and visited less often. Boohoo’s share price fell more than 3% on Wednesday morning but is less than a tenth of its value three years ago, when it was riding high on a shift to online shopping during the coronavirus pandemic while high streets were affected by government lockdowns. The poor performance meant the company did not give 16m shares to shareholders of PrettyLittleThing.com who are led by Umar Kamani, a son of the Boohoo co-founder and chair, Mahmud Kamani. The 16.1m share payment, promised under a 2020 deal, was only due if Boohoo’s share price hit 491p by March this year. If they had hit that level, Umar Kamani and his fellow Pretty Little Thing investors would have received about £79m in stock this year, just ahead of his four-day wedding last weekend on the French Riviera involving performances from Andrea Bocelli and Mariah Carey. The company said: “While trading conditions have remained challenging due to cost inflation, uncertain consumer demand and normalisation of the channel shift online, the group has a strong business model and clear strategy which it is focused on executing to unlock market share.” Boohoo and other online sellers experienced a boom in demand during the pandemic, when many households turned to the internet to buy comfy clothing to work and rest at home while many high streets were shut down. With high streets now reopened, and new competition from cut-price Chinese sellers Shein and Temu as well as secondhand marketplaces such as Vinted and Depop, once successful online fashion specialists have taken a hit. 🐿 learn more by Betsy Reed: https://lnkd.in/gnPpKMgM #metaverse #fashion #ai #web3 #investment