I also wonder about the impact that the internet will have on the 'big ticket' items... most young parents are more tech savvy than any other demographic, and when spending say 200 to 800 for a pram... or buying any of the other items that MLC stocks it seems that competition will be strong.
There is one shop i know called 'baby bunting' which is always full on weekends... i spent some time there and understood that it is the in store service which matters. This shop is in a blue ribbon suburb which is probably why they can get away with it... whether MLC can mimic / exceed this will be interesting.
So my view is that it will be interesting to see how MLC positions itself... high cost and high service levels... or low cost and high volume.
The business plan they have set is ambitious, and i do agree with the comment that they 'plan to monopolise the sector' ... but is that a viable business plan? Internet competition and rents will be high... particularly in the few locations I have seen them in.
In addition I havent yet seen how the Priceline agreement is working. There is very little information being distributed by management, which I always assume means bad news.
Negative cash flow at the beginning of an economic downturn is not good news either... particularly as the rental costs would be more or less fixed for three to five years for most leases AND given that most goods are made out of Australia the high dollar will also give them a hit.
I was impressed last year, but with the recent inspecie distribution by CIW... my expectation is that this will be taken over perhaps by the Myer group or perhaps even MLC UK at a low multiple. They wouldn't have invested so heavily in this for no reason... and reading their annual report I can see that they already have international divisions. Given they own the distribution agreement it would make sense to me.
Cynical... perhaps...
In any case... i sold my shares.
Generic products, Debt, Negative cash flow and a young management team that havent worked togethor for long in a challenging environment.
No internet strategy in this market is a huge lapse in my opinion. Would have been a chance to shift a lot more volume and build a great brand in my opinion... I did look at the website, and I find two flaws... parenting advice from 9 to 5... and no forum for parents to build a community... this is missing in Australia and if they do want to monopolise the sector they should take the lead. A 24 hour resource would have proven they are committed to this and would have led to them being the one source for all parenting needs.
Until the management team starts scoring some runs this share price will drift. +ve cash flow would be a huge aid.
MLC Price at posting:
25.3¢ Sentiment: LT Buy Disclosure: Not Held
