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AgeOfReason

04/10/22 9:49 AM

#1288 RE: AgeOfReason #1287

The following is an analysis of Komo's financials.

Page 12 of "Management's Discussion & Analysis" (of April 1, 2022) shows Komo's gross profit margins (expressed as percentages) by channel. Notice that while their total percentage margin is 38% for the quarter ended January 31, 2022 the margin for wholesale is only 23%. All expansion into the USA and even all areas outside of proximity of Vancouver, British Columbia, Canada likely will be in the form of wholesale. That is because it impractical to ship frozen foods long distances Direct-to-Consumer. Likewise it is impractical to deliver hot meals long distances. As a result hot meals delivery is a very small percentage of Komo's total sales, as indicated on page 11. While page 11 indicates Komo's Direct-to-Consumer revenues/sales as being about one-third of total revenue for the three months and six months time periods ended in January 31, 2022, page 10 has a monthly chart which shows that after November 2021 Direct-to-Consumer sales have grown much slower than Wholesale sales. I suspect that is likely due to the impracticality of shipping frozen food long distances direct to consumers. The above means that as Komo expands sales to outside of the Vancouver, British Columbia, Canada their gross margin percentages will drop. That is discouraging.

Since Komo's products consist of food, there are low barriers to entry for potential competitors of Komo. It is also fairly easy for existing large competitors of Komo to copy Komo's products. They can read the ingredient labels, see what is in the food, and have food chemists analyze the components of the food. The existing large frozen food producers can also get their products in stores throughout the USA much faster than Komo can.