Ann: Publication of Research Report by Patersons, page-39

This one is frustrating to watch because the founding strategy is a bad one, but if done right there is opportunity.

They are now cutting a whole lot of costs and focusing on margins rather than revenue - this should of been done from the start. They run low quality undifferentiated businesses in very large, broad categories with ample competition, downward pricing pressure and competitors with marketing budgets and customer service departments multiples the size of Shoply. I don't know how anyone would expect them to compete and win in these sectors in the medium to long term.

Some of the things in today's update are positive (albeit very late), certainly there's a lot of wasted costs that need to be removed. But the move into furniture and rugs?

Have a look at what YHD are competing against. Virtually every one is struggling and offering discount prices. MyHouse is running a $20m overstock clearance sale up to 70%. Myer and DJ have decent sales. There is zero differentiation but cost and customer service and YHD differentiates on neither. estore and Warcom have issues with customer service and are 2nd tier retailers in what is again a hyper competitive market. Furniture and rugs is exactly the same. There needs to be a significant change in strategy and I suspect that will require some new people on the board, but I'm not confident that will happen.

Hopefully they can raise some capital and get to break even as soon as possible. The existing assets can be optimised but if they want to grow the business and regain the market's trust and support from there then there will need to be a significant change in strategy.