Savvy Trades and Investments

[gilead23]

RTMNF sales quarter looks strong

They may be set up to beat last quarter although unusually weak margins for example is a risk. Covid closures are also still on the table in Canada.

Last quarter they earned .45 on 178 million in sales. There was some one time stuff there including a small tax benefit so say a natural .40 untaxed.

The monitor reports give a regular update on sales and the balance sheet which is handy.

From September through 11/6 the monitor report showed sales of 137.4 million. Through 12/18 they are at 267.4 or 130 million dollars. So they are short of last quarter by less than 25% right now excluding the first 6 days of November, the last 2 weeks of December and all of January. I think they are a shoe in to kill last quarter on the top line.

Cash balance is now 111 million or a bit over 2 dollars a share. They will have to pay back creditors for the 95 million as part of the settlement so I would wash out most of the cash.

If you read through that monitors report they also assigned liquidation value to all of the assets, and as I read it the company is trading at more or less liquidation value, looking at another earnings quarter of probably between 30 and 60 cents, and still sitting at 2.28 a share CDN.

These retail turnarounds can implode. I remember SSI going crazy a few years back on a temporary comeback in business, but I really like the risk/reward on this. If the turnaround is sustainable it’s almost certainly double digits next year. They’ve done all the usual stuff with closing stores and renegotiating leases which should give them a lower cost structure.

Monitor reports are here. I’m comparing 11/23 to 12/27.

https://documentcentre.ey.com/#/detail-engmt?eid=380