Loblaw Companies (TSE:L:CA) a large Canadian grocer is fighting off the invasion of Canada by American Retailers. Costco, Target, Wal-Mart, Sears, Home Depot, Marshalls and maybe Nordstrom. They are all coming.
But ponder this Joe Fresh division. It offers chic trendy clothing at cheap prices. How can you miss. The locations are stapled to many Loblaw grocery locations. Good locations for food. Unproven for fashion retail.
Go to New York New York. One existing Joe Fresh location on 5th Ave. Not sure how they can cover the rent on 5th Ave with $20 rain jackets. But they are upping the ante and opening up a new location on the upper east side on Madison.
Both locations are tony high rent and do not have $20 per item business models.
So what is Loblaw’s up to?
George Gutowski writes from a Caveat Emptor Perspective.
Loblaw Great Food Logo. (Photo credit: Wikipedia)
Loblaws (TSX-L) is still looking for ways to score on Joe Fresh. Days before a hurricane was to shut down NYC the Fifth Ave store is selling decent rain jackets at $19. No sense of supply and demand. Rain jackets are now very important in NYC. Not to mention you will never cover Fifth Ave rents by selling $19.00 items.
Arithmetic not there. Wall of worry seems very high on this one.
George Gutowski writes from a caveat emptor perspective. Join him on twitter@financialskepti
Image via Wikipedia
Loblaw (TSE:L) through its Joe Fresh brand is expanding into New York New York. If you can make it here you can make it anywhere. To most investors Loblaw is a grocery store. Low margins needing high turnover. If an investor wants grocery store exposure in the portfolio then go look at Loblaw, do your home work and take it from there.
Now they are confusing the risk weighting by ramping up apparel which is a completely different business. They skirt around financial governance issues and regulatory compliance by announcing the venture as a brand. Most product launches or new divisions interest investors when you can discuss earnings and when they become accretive. Not one word of mention about money. How will the investor track benefits? Where does this stand in wealth creation for shareholders.
Club Monaco expansion into NY NY is cited as an influence. If I have the story right Polo Ralph Lauren eventually bought it out and the boys made some money. Is Joe Fresh being primed for a quick flip? Will Loblaw eventually remove it from their corporate financial body to unlock value and then sell it later for big bucks? Will the Loblaw shareholder be compensated for supporting the new venture?
Loblaw is a public company with a controlling shareholder of George Weston Limited. If you follow the corporate tree you find the Galen Weston Family and Holt Renfrew a high-end Canadian Fashion retailer. Listen for things that make noise in the back room. Then listen and wonder why its very quiet.
Disclosure: “George Gutowski” writes from a “caveat emptor perspective”. I hold no positions in stocks mentioned in this post. I have no plans to initiate new positions within the next 72 hours.