GXL investment thesis, page-36

""I suspect you might not have truly seen operating leverage in action when like-for-like sales stall in what is largely a fixed cost business."

And where's your proof this is happening/going to happen?
Are you a fortuneteller?"


I wish I was a fortuneteller, but I'm not.

I'm just a mere prudent investor who bases a lot of his assessments on precedent.

And there is much precedent for same-store growth to go negative at some or other stage on the life of a retailer. In fact, every retailer I have ever researched has encountered zero, or negative, same store sales.

And when that happens, because the fixed costs are still going up (landlords of commercial real estate aren't known for their propensity to cut their asking rents), the result is a pronounced margin squeeze.

But, hey, maybe Greencross will be the first retailer that grows like-for-like sales to perpetuity.

I'll be highly embarrassed if that happens.