Good morning!

This is the placeholder article, published the night before, to enable early comments and suggestions from readers.



Fishing Republic (LON:FISH)

  • Share price: 22.75p (-40%)
  • No. of shares: 37.9 million
  • Market cap: £9 million

Trading Update and Board Changes

This retailer today falls below our £10 million limit but I certainly need to cover this trading update given it's one that Paul and I have been commenting on.

Paul has been a long-term bear on it (kudos to him!), whereas I previously thought it had some potential to be a winner for shareholders. Though I did have some big concerns about the recent interim results  on 25 Sep, when gross margin collapsed from 50% to 36% and own-brand sales declined. At the time, I said it looked like the company might need another placing, given that cash had fallen to less than £700k.

The collapse in gross margin was a huge red flag, but the company justified it at the time by saying:

To support the new openings, we utilised discount offers to promote high value capital items. This led to a negative mix effect in the period as the balance between higher margin consumables and lower margin capital items changed.

Furthermore, the company anticipated moving back into profitability for the full year, so shareholders were still being guided that things were more or less on track.That was on 25 Sep.

The last seven weeks have apparently been terrible:

Since the Company last updated the market in September, the Group has seen a significant deterioration in trading.  This reflects a substantial increase in price competition as major competitors and independent stores have aggressively sought to maintain their market share, particularly at the end of the main fishing season.  As a consequence of this change in market conditions, for the first time this year, monthly like-for-like store sales reduced, with a decline of 13% in October.  This is in contrast to like-for-like sales growth of 16% experienced in the nine months up to the end of September.

If you can excuse me for using the phrase, I think the 16% LfL sales growth in the first nine months of the year might be a bit of a red herring! Since I think at least a quarter of the stores being measured…

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