Friday 17th May 2002
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Rod Duke: We believed it was important for the IPO's success to have an active after-market, that is to say, a bank of shares available for sale at any given time at a given price. To achieve this we must recognize that of the 210 million shares on issue:-
- 75% is with the RA Duke Trust
- 5% is with Harvey Norman and Associates
- 2% is with the Trust Associated with senior management
- 3% is with Staff and Company friends
That leaves approximately 30 million shares that may be considered available at a price.
I also suspect that customers did in fact buy shares at $1-40 and above, and have enjoyed the substantial rise to levels of around $2.
Rod Duke: The 25% level was the minimum requirement set by the NZ Regulatory Authority.
Rod Duke: The price rise at this point in time does not necessarily give the company any particular advantages. The market price on any given day is simply someone's view of the company's value in delivering an increased value of each share and/or dividend yield.
Rod Duke: My answer to everyone on that issue is this. When someone can show me that the company will derive significant benefit by me selling down to (say) 69% from 75%, then that is the point at which I would consider the proposition. Up until now that has not occurred.
Rod Duke: Our offering is quite different.
Philosophically we differ mostly in the way in which we present our goods (shops) and the quality of our goods.
- We may very well, in the future, have 100 stores. But those 100 stores may be made up of 4 or 5 different brands, each specializing in a particular part of the retailing landscape. Just as Briscoes Homeware specializes in housewares and Rebel Sport specializes in sporting goods, another brand or two will specialize in a different segment.
- The Warehouse model is a single brand strategy, a bit like the department store model. Not specializing in any particular segment, simply having a big store with lots of small offerings of a lot of categories but specializing in none.
Both models have a place and to date both have been successful.
Rod Duke: I can only say we continue to investigate a number of opportunities.
Rod Duke: We believe there to be a number of ways we can assist one another, but it's a little early to explore those publicly.
Rod Duke: The single reason for our success to date has been the quality and appeal of our offer. Customers recognize that quality merchandise at a good price is an attractive proposition.
Our gross margin is not high but our cost of doing business is low. We therefore, can deliver merchandise at great prices and attractive returns to shareholders.
In the future we will gather momentum as new opportunities come through, e.g. Rebel Sport doubles in size and Briscoes expands and reformats.
Rod Duke: We are currently looking at establishing a website for Rebel Sport which we hope to have available in the second half of this year. Briscoes Homeware site will follow shortly.
Rod Duke: The need to advertise and promote is greatest when you are not in the very high traffic shopping centres. For us and most other retailers the choices are:-
- High rent
- High outgoings
- High customer count
Non Shopping Centres:
- Low rent
- Low outgoings
- High advertising resulting in high customer count
Rod Duke: Outside of the obvious - Sales and Gross margin - for me the most significant is stock-turn. That is our ability to turn over stock (dollars) quickly. In the year ended January 2002 we achieved 4.6 stock-turns, last year 4.1, our target is 5. The only effective way to achieve this is early recognition and action of problem products, together with a "just in time" programme of successful products.
Rod Duke: The Briscoes business was basically knocked into shape by the end of 1990, one year after the purchase. No it didn't take longer than expected.
Rod Duke: We have experienced a sales improvement of up to 28%.
Rod Duke: Rebel's same store growth of 24% is exceptional and I guess there's a number of factors.
- The market is likely expanding
- Rebel's market share is expanding
Rod Duke: I don't see anything on the horizon that will slow the growth.
Rod Duke: Both brands offer good growth opportunities, but in different ways.
Rod Duke: I'm not privy to that information.
Rod Duke: There are not any overseas influences that have helped grow our business but we have identified a trend. That trend is to specialization. You only need to look at Australian, Japanese and U.S. retailers to see that the trend is clear. If you, as a retailer, have a significant differentiating feature you are more likely to attract more customers. If your offer is only "a little bit, of a lot of categories" you will lose customers to the specialist.
Rod Duke: We use no overseas consultants; we have local experts to deal with local opportunities.
ShareChat thanks Rod Duke for taking part in this Investor Interview.
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