I can go on for hours about Reece's principle strengths.
The moat - with little doubt - is the management information systems... in-store controls and supply chain management.
And it is the management information systems that give rise to the culture of premium service. (People say it is the service that make Reece unique... but without the information accuracy and the controls, you wouldn't be able to develop the reputation for service that they have. The premium service is an outworking of the excellent systems, I reckon.)
But for the sake of brevity, the best way to think about Reece, I have always contended, is to liken it with Bunnings in terms of its industry dominance and footprint. Which, like Bunnings, brings with it scale efficiencies and favourable purchasing terms.
The difference is that Reece - unlike Bunnings which is notorious for its woeful levels of customer service (and ironically Bunnings stills prospers despite this) - premium customer service is ingrained into Reece's service culture - to both the retail and trade segments.
I know this sounds like a motherhood statement but I have seen it on many occasions myself and I have spoken to many plumbers over an extended period of time and they say the same thing: "If you need something, and you need it fast, and you don't want to waste time or be messed around or go to the store and they don't have it in stock, then Reece is THE place to go."
And the reason Reece doesn't disappoint is because of its store and inventory management systems and its supply chain, which are all miles ahead of anyone else and which keeps receiving investment to maintain and indeed increase the lead Reece has over its competitors.
I had occasion to talk with the reclusive chairman, Mr Wilson, at an AGM in 2011. I'll never forget what he said: he alluded to the fact that Reece had invested something like $500m in management information systems and supply chain optimisation - most of it fully expensed - over the preceding decade!
That's an significant investment for a company whose cumulative EBIT over that 10-year period was little under $1.2bn.
By way of an example of best-of-breed systems translating into premium service, about 6 months ago I needed to replace a plastic, 110mm drain grate.
Its a sub- $10 item.
So I go to my local Reece. The person at the counter (very friendly person, very clean counter) checks the computer and within 15 seconds tells me that they had 5 of those in stock last week, and the last on was sold that same morning, and that the replacement will be in store the very next morning.
Person then says that he has just checked 5 other stores in adjacent suburbs and the system confirms that stores V has 3 in stock, store W has 2, store X has 4 and store Y has 5. Store Z is out of stock but is die to be replenished on the same re-stock run the next morning as the store I am in. All this takes less than 60 seconds.
Person then asks if I have any other business I needed to do in the area, because if I did, there was a driver coming from store X, which was nearby, within the hour and he could arrange for the driver to bring over the item.
I say, yes, I have something to do, so I and undertake to come back in an hours' time.
When I do return, the minute I walk back into the store entrance, the person who was serving me earlier is not at the counter, but a different person is. Despite this, the different person - who was on the counter attending to a another customer when I was in earlier - recognises me and reaches under the counter for my item, already in a plastic bag, with sales invoice enclosed, ready for me to go.
I pay, and leave the store, having spent less than 180 seconds in there the second time.
And that's the proactive attention to detail from these guys.... for a $7 item.
They are trained to provide the service, but its the systems that facilitate it.
The moat is the systems.
REH Price at posting:
$34.71 Sentiment: Buy Disclosure: Held
(20min delay)
