Far from sparkling

Finweek English Edition - - Companies&markets -

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.

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