REH moat, page-124

"...maybe this is an opportunity for a moral chain like Bunnings to become the gorilla in the room, if Tradelink goes belly up.
i bet a lot of tradies who are stuck with Reece are hoping that too!!!"

@crazypunter,

Incidentally, as I always do, I was analysing the most recent Reece financial result in some detail, and one of the many things that struck me about the result was that the Gross Profit Margin has risen, yet again.

Here, for your edification, is the trend in Reece's GP Margin over the past relevant comparable reporting periods:

DH2013: 30.7%
DH2014: 31.5%
DH2015: 32.0%
DH2016: 32.2%
DH2017: 32.5%

This means that, despite Reece making more profits out of them every year [*], those tradies still keep rocking up there every morning for their plumbing supplies.

So, if it is not discounted product prices that is doing it, one wonders what is keeping all those tradies going back to Reece all the time.

We know there is no law forcing them there; nor is anyone holding guns to their heads. But it has to be something that keeps them "stuck" onto Reece, instead of going to Reece's competitors.

One has to wonder what that something is.


[*] A 180pb uplift in GP Margin over the past 4 years might not sound like much, but when it is applied to Annual Revenues of ~$2.7bn, it translates into almost $50m pa in extra operating profit. Now, if one capitalises that extra operating profit at a conservative multiple of, say, just 10x, that translates into $500m of valuation uplift.
Whatever are all those tradies thinking, gifting Reece shareholders with all that extra value?