This company, primarily sells, by their own stores and online, leather and leather craft items, has been grouped into leather &craft retailer sector in personal items industry.
It seems that, based on the typical company data, the demand for leather &leather craft products in North America market in the past three years has been weak and declining as indicated by the declining same store sales.
The decline, while not as bad as we have seen in other retail sector, should be consistent with the whole climate in retail industry of US market. The typical companies in this sector have managed to keep their retail sales by promotions. However, their wholesale sales inevitably decreased due probably to the slowing down traffic in store of their retail customers.
Companies have responded to the slowing down traffic by lowering product costs and expanding into new market areas. The typical companies’ gross margins are up to about average 64% in 2017. However, the SG&A as percentage of sales (including store occupancy and staffing costs) went up to about 55% due to deleveraging of expenses as a result of expansion. The typical operating margin thus went down to 9% in 2017. Companies’ cash flow thus significantly decreased during the same period.
The typical average stock price/cash flow ratio is about 15.
It seems that the demand for its leather products of this company in North America market has been weak and presented downturn trend in the past three years as indicated by its continuingly decreasing same stores sales. However, it seems that the declining same store sales have mainly been due to decrease in wholesales and sales to retail customers increased actually.
The first three months fiscal 2018 compared with the same period of 2017
Net sales increased by 0.7%.
The same store sales (North America) decreased 1.2%.
The fiscal 2017 compared with the 2016
Net sales decreased by 0.7%.
The same store sales (North America) decreased 2.3% primarily attributable to decrease of 9% in sales to non-retail customers offset by increase of 6% in sales to retail customers.
The fiscal 2016 compared with 2015
Net sales decreased by 1.5%.
The same store sales (North America) decreased.
The fiscal 2015 compared with 2014
Net sales increased by 0.9%.
Its gross margin has increased from around 63% in 2014 to about 64% of 2017 due primarily to lower product costs and favourable product mix (to retail customers). However, due to large increase in it’s SG&A as percentage of sales (from 48% to 55%) as a result of expansion of new stores, its operating margin decreased to about 9% in 2017 and caused a 30% decrease in cash flow in 2017 compared with 2016.
Stock performance
This stock currently has a stock price/cash flow ratio of 15. We think that its stock is being relatively undervalued considering its relatively better performance in its same store retail sales and its ability to improve margin.
