LIQUOR STORES NA LTD 4.70 PCT DEBS T.LIQ.DB.B

Power of the USD

[OilMoneyAB]

Hello, 

 

New here and looking to make a 1st time investment into LIQ. Obviously the Div seems pretty ridiclous at the moment. How powerful will the USD be to the bottom line with the current exchange rate? Could that be enought to save the Div if US store sales continue to grow?

[d_trump]

yes, the strong USD is good for LIQ.  Their US store count is less than 20%, but they are larger format stores on average, so with the recent additions, US revenue will be about 35% going forward.  They do have some USD corporate expenses so that will take away a little.  But I think their debt is all CAD so that is good as well.   Net net, the strong USD will definitely help

[alxoren]

No, the strong exchange is not good for LIQ Most of the liquers sold in the stores are imported (whiskeys from US, Rum from Carribeans, Brandies/Cognacs and wines from Europe .. etc) Since the vast majority of the revenue/sales is in domestic/Canadian market, the margins are going to be squeezed as the unemplyed Albertans have less money to spend on imported booze. The assuptions that they will

[d_trump]

the prices on US imported brands will go up to protect the margins (have you bought grapes or brocoli recently?).  The CAD has done ok against other currencies (EURO) and yes consumers will turn increasingly to domestic brands.

[OilMoneyAB]

I see both your points. I geuss my main thing I am trying to judge is how strong the tailwinds will be for bringing back all the US dollars to Canada. We are now at 100K US = 145K CAD this is huge maybe allowing the Div to stay?

[alxoren]

Divy will be cut to allow investment related expences in the US stores  as well as the implementation  extention  of the SAP logistic system. 1. This will not be done immediately,  as this might affect further the pressure on the stock.  I believe they will postpone it to May or July 2.   I do not think it will be drastic .. may be to 0.06$/months 3.  you should

[OilMoneyAB]

Thanks, I agree with what you said. I just don't want to purchase in the 6's and have it go down to the 4's when the divy is cut, but seems like that is fairly priced in.. but maybe we are forming a bottom in the 6.50 range...? only time will tell. I will probably initiate a position next week. Can you explain more on the SAP logisitic system? 

[mercatos]

Your assumptions are totally incorrect.  You should check out what SAP is first. It much more than a logistics system.  From that comment I don't think you know what role a enterprise wide system can do for an organization.  My other comment is you should understand what and how a P&L statements work before making these hair rained comments. Don't invest in something

[Ticker28]

I second the point about researching prior to making incorrect assumptions.  SAP is enterprise software that manages the whole business 360.  It will transform them and allow them to manage in real time.  Something their competitors won't have.

[Goldbuggy1]

LIQ has paid a monthly Dividend since 2004 and since there IPO without any decreases. The only changed it to be inline when they went Private instead of being a Trust Fund. But to the Shareholders the payment was equal. That is a perfect track record and one any company would be proud to have and want to keep. The CEO has recently stated that the company is aware of the important of there Dividend

[OilMoneyAB]

    That would be a great idea, to issue debentures at 6% and use that to buy back shares, very smart move long term. 

[Goldbuggy1]

The company has several options in raising more money, which they don't really need right now. They can extend there Credit Line. Sell Stocks, which I don't think they would do at these low prices, or offer more debentures. Sell Debentures paying them 6% a year, (last ones sold paying 5.85%) and buy back stock where you won't have to pay 15% a year on dividends, and thus you saved

[Ticker28]

D Trump, you are spot on i believe.  One option is too pass the cost on through to the customer which protects the margins which must be how they offset any import deficits.  Also your dead on the money that people will trade down brands or go local as you get more bang for the buck.

[Goldbuggy1]

Keep in mind that a strong US Dollar also make our stores in the USA to be able to buy imported booze cheaper. If a High US Dollar reduces sales in Canada then it stands to reason it also increases sales in the USA. No?

[ILUVDIVIDENDS]

This post has been removed in accordance with Community Policy

[Goldbuggy1]

I think this has more to do with the Customer Demand Thing more so than a USD Thing. If they are selling a lot of expensive French Champaign they are going to restock there shelves and order more. So Ultimately it will be the Customer who decides if he wants to spend more on American Whiskey or less on Canadian Whiskey.

[OilMoneyAB]

That  is the fear customer store demand goes down. Drinking won't stop but now those customers are more price aware and going to superstore, Costco, and co op. There is a co op right by my liquor depot and I never go to liquor depot because the prices are insane compared to co op. Yet I'm debating investing in these guys lol. Only because it seems very cheap at the moment.

[Ticker28]

Prices are regulated by the province of Alberta and they purchase from a liscensed distributor.  I think what D Trump was trying to make a point of was that the funds from the US operations would be USD and add approx 40% when converted into CAD on the earnings statement. Some keep thinking this is an Alberta only story but don't lose sight of the economy of scale that the east US

[Goldbuggy1]

Cost will go up in US Stores, such as rent, wages, etc., but so will profits. Since stores in the US are making a profit then a stronger US Dollar is good for the company and better. Keep in mind the LIQ also has large format stores in Alaska, which is also Oil Dependent and paid in US Dollars. So the stores profits in Kentucky would have to first outweigh the stores in Alaska, to be a big benefit

[OntarioDave]

Both Alaska and Kentucky are not large population markets so the impact won't be as great as maybe anticipated.  I'm most excited about the East US growth as it should boost EBITDA.

[OilMoneyAB]

  Agreed, That is one of the main reasons why I see potential here. Anyknow know how much it will cost to launch the new US expansion / how much has already been paid?

[d_trump]

in the news release, they said the Mass. and Conn. stores will require an investment of $5M USD total.  The square footage of these 2 stores is simalar to the acquired NJ stores that generate $50M in sales, so sales should be comparable.  $5M invested to get $50M in sales is impressive.  Payback is likely about 18 months.

[OilMoneyAB]

    Thanks yeah I just read that, after doing my DD past couple days I am going to start a position. The entry price right here is too good to pass up, and the US expansion will be very positive.  Any Canadian Company doing buisness in the US right now is very intersting and I look forward to them bringing those US dollars back to Canada. Time to start DRIPing this company and

[mercatos]

I agree with both of you.  Buy on the dips till this market turbulance settles down.

[Ticker28]

To set up shop in US for large format costs around $1.5 million and cost is recover in about 12 months.  great ROI if you ask my opinion.

[Goldbuggy1]

Your 70% count is based on the number of stores and not sales or market share. In essence you are saying that one of the small convenient stores, perhaps in Calgary which has 44 stores, is equal to a large Format Store in Kentucky. This just isn't so! Just the 2 stores in New Jersey will have gross sales of 50 Million US Dollars. That would be about equal to 8% of LIQ total sales. So does that