Far from sparkling
OBSERVERS SAY franchise group Taste Holdings has lost focus by venturing into jewellery after successfully building a fast food chain with a promising future. But CEO Carlo Gonzaga is adamant NWJ Jewellery is a perfect complement to its Scooters Pizza and Maxi’s brands.
Taste recently delivered unimpressive results for the six months to August 2009. While the group grew turnover 170% to R85,8m, earnings per share were down 77% to 2,3c/share and headline EPS down 43% to 2,1c/share. Taste attributed that to financial costs incurred in the acquisition of NWJ Holdings in August last year, as part of the group’s vertical diversification strategy. However, its NWJ investment hadn’t enhanced Taste’s earnings at the time of writing. Management says 70% of NWJ’s sales traditionally occur over the festive season (when more people get married and are buying gifts) – the group’s second half of its financial year. Gonzaga adds that unlike in the previous corresponding period, Taste had opened fewer stores (only nine against 16 previously) during its reporting period as franchisees struggle to secure funding.
Gonzaga has now pinned his hopes on the Christmas season to bring back Taste on the map with its NWJ investment expected to begin realising value for shareholders. However, the prevailing recessionary conditions have created some anxiety about whether retailers should expect higher sales over this year’s festive season.