Flat, or veri good and getting better
THERE’S BEEN SOME firming in the share price recently, but direct response and store retailer Verimark Holdings’ share price has basically been flat lining since August last year after it put out a drastic profit warning on declining earnings. Below R2/share there may be potential for investors with a speculative bent, but they must decide: Is Verimark’s TV-cum-retail store model still viable; and more broadly are the days of direct TV marketing gone forever?
That said, it looks like Verimark is adapting its business model to promote online shopping. It’s not surprising as CEO Michael van Straaten closely observes the US market for retail shopping trends. And he’s busy – when Finweek first tried to contact him he was in a meeting with Bruce Fordyce. There will probably be something big around the Comrades Marathon.
Verimark went through a bad patch last year when it couldn’t source the original and exciting products that, at the risk of being labelled sexist, excite women and seriously over-extend men’s credit cards.
But apart from what Van Straaten called this “unusual dearth” of new products to launch, he also admitted he’d been a bit distracted around the launch of Verimark on the JSE.
Which raises the concern, denied by Van Straaten, though he says it may have applied earlier, that this business is very dependent on its CEO, also one of the major shareholders. He did promise, however, that new products would be coming through in the new financial year and that profitability would improve.
With a February year-end, Van Straaten must already have a good idea of the numbers and investors will know in a few months’ time. A trading statement has again been issued saying earnings improved over the first half, but late product launches and the weaker rand still kept a bit of a lid on profits.
If his word is good, next financial year should see Verimark start to return to its 30-year record, so now could be a time to look at the share, at 186c/share way below its high for the year of 420c/share.
But is direct TV marketing, though it only accounts for a fraction of sales but pulls consumers into the retail outlets, still Verimarkable? We think it might be – the share’s speculative but promising.