Good morning!

Today I'm looking at:



Bonmarche (BON)

There is going to be a lot of politics today, to distract us from the markets.

One story where I'd like to add a footnote is Bonmarche, which is now in administration.

Paul and I covered this stock many times over the years - see the archives.

In September 2018, I noted that it was "cheap on conventional metrics" and "could be worth a look, as a contrarian play", while also noting that the company had no plans to reduce its large  porfolio of more than 300 stores. This stance I described as "complacent".

Things went from bad to worse since then, and I grew increasingly wary of the company's outlook.

The Chief Executive has now admitted in a statement:

"We have spent a number of months examining our business model and looking for alternatives. But we have been sadly forced to conclude that under the present terms of business, our model simply does not work," she added.

For my point of view, Bonmarche has (or had) three major problems:

  • online sales much too small relative to store sales (c. 12% of total).
  • no planning took place to reduce the store estate, if necessary.
  • the brand identity doesn't jump out.

For now, the stores continue to trade as normal and the website is still live. No redundancies have been made, according to the BBC. The business is being marketed for sale.

Philip Day's investment vehicle, which owns 95% of BON shares, says it is "disappointed with the result of our investment in Bonmarche."

My view  - if Philip Day can get it wrong, and if a company which looked cheap on conventional metrics can go under very quickly, this provides further confirmation to me that we need to be extremely cautious when it comes to the retail sector.

The trend of legacy retailers collapsing shows no sign of abating. I wonder…

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