Reposting - Savyinvestor333 link to Jesse Gamble Jesse Gamble, Senior VP & Portfolio Manager, Donville Kent Asset Management
Reitmans (TSXV:RET.A; TSXV:RET)
Covid lockdowns proved to be a decisive moment for Reitmans.
Due to government forced store closures, Reitmans strategically entered CCAA protection and restructured their business.
They exited this process in 2022 after:
- Closing over 30% of their stores
- Consolidating their banners from five to three
- Laying off 1,600 employees
- Paying 50 cents on the dollar to settle debt & liabilities
This process gave them cover and a cheaper way to close unprofitable stores and renegotiate retail leases at an opportune time.
We estimate they saved 10% on lease costs across their high-tier locations and over 60% on their second-tier locations.
Now Reitman’s carries:
- $68m of cash
- No debt
- Has reported Net Income of ~$60m in the last 12 months
- Owns roughly $200m of real estate in Montreal
- All while trading at a $110m market cap
Add in a quickly growing e-commerce segment, now representing 25% of sales, positive online search trends, increasing revenue per square foot and decreasing cost per square foot, we think the profitability is sustainable.
In past recessions, like 2001/2002 & 2008/2009, the business remained profitable, as they are a value brand, plus they are one of the few retailers with a growing customer base.
We estimate their target market is growing 3.3% per year.
We think the stock will see a massive re-rating in 2023 as it gets back onto investors’ radars and reinstates dividends & buybacks, plus gets a push to monetize real estate.
https://uncommonsenseinvestor.com/best-stock-ideas-for-2023-from-our-all-star-roster/