RE:The Problems: Oil Prices and AlbertaFootballFan1 wrote:
I think the reason for the share price drop and doubts about revenue, cash flow, and profitability going forward is LIQ currently has 252 stores and 176 of them (70%) are in Alberta.....I suspect investors are worried that should oil prices remain "lower for longer", the Alberta economy continues to decline, people move out of the province, etc., this will have an ongoing adverse effect on LIQ revenues, profitability, cash flow, the dividend, etc.......I realize that LIQ is trying to diversify in the USA, but out of necessity they are doing it very slowly with one store here, two stores there........will not make much of a difference over the short term to compensate for the fact that the bulk of their sales are still in Alberta........Any comments would be most welcome!
No doubt that Alberta Economy is facing tough Head Winds right now, with low Oil Prices, but this has been going on for 18 months now, so nothing new really. Just lower than last year, which does hurt more. But there is no indication of a mass exodus from Alberta last year. In fact the population grew by 200,000 People. Not near as high during the Oil Boom Years, but still up and not down. I do however wish that people would stop counting stores in the Province of Alberta and comparing them as all stores being equal. That smaller convenient store next to 7-11 in a residential district in Edmonton is not the same as a 20,000 to 25,000 Square Foot Store in a huge shopping plaza in Kentucky. Not in size or sales. Just these 2 new stores in New Jersey will generate $50M USA is Sales a year. That is about $73M CAD. Our total forecasted sales for the year 2015 is expected to come in at about $730M CAD. so these 2 stores alone will add 10% to our total sales. Granted we only own 51% right now, which can very easily can be turned to 100% overnight, but even now that is 5% of total sales. So now do you want to still count all stores as being equal? According to sales, these 2 stores would be equal to about 20 stores or more in Alberta. The only large format stores I know that LIQ owns in Alberta are the 2 Wine and Beyond Stores, so this is why you can't use the store count as a percentage of sales. I for one would like to see a percentage breakdown in sales after the full purchase of New Jersey and the 2 new large format stores opening in the N.E. soon. Add to this the large format stores in Kentucky and Alaska, and the smaller stores in B.C. and it wouldn't surprise me one bit that at least 50% of the sales now comes from outside of Alberta. I have no doubt that with the present Alberta Economic conditions, and a 2%increase in Corporate Taxes in Alberta, that couldn't have come at a worst time, as well as the new 5% liquor taxes added on to the sales price, that this stock shouldn't be trading off of its high. But to go from almost $16, to the present $6.50 is just plain ridiculous and crazy. That is a 245% loss on no really bad news from a company who also has many large stores outside of Alberta now. Large Oil Companies dealing mostly in Alberta, like Suncor for example, didn't even suffer nearly as bad as LIQ did. How do you explain that?