The suggestion to look at Park (LON:PKG) comes from a commenter on a previous post, so thanks for that. He noted that they had 'high returns on capital' and seemed 'very investor friendly', which is always enough to interest if the price is right. On top of that - and this is probably more  of a kicker - he noted that they'd just raised more capital through the markets for growth. Companies which earn high returns on capital are able to put that money to particularly good use in compounding the capital of their investors, and so the suggestion of the expansion of an already successful business model has to pique some interest.

The business

So what do Park do? Well, they're best known to me for their nauseating Christmas adverts with a fairy sprinkling magic on suitably awed looking families. That side of the business is a Christmas savings scheme - you put in money throughout the year in exchange for vouchers or products at Christmas, effectively spreading the cost of your Christmas shopping. I think it's a very sketchy business; the only time I ever think it's even reasonably logical is if you know you'll spend the money if you put it in a better savings scheme (like any time-deposit or even just a savings account), and a product which is only rational if you assume a large dose of irrationality on the part of the consumer seems dubious to me. The vouchers aren't actually that bad - you save, X a week for 52 weeks and get a voucher worth 52X at the end of it. You're not losing any money; the only loss is in the interest in the interim which, frankly, is negligible at the moment, and in return you get some peace of mind. The lock in isn't huge in these vouchers, since they're quite widespread - but you do have to pick (loosely or specifically) in advance where you want to spend the money. Here, the benefit is evident for retailers - Park can essentially tell retailers in January that a customer will have a voucher for Arcadia Group, or Debenhams, or wherever, for a certain amount of money. I say loosely because some of the cards have quite an array of retailers, so there is some…

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