Shoes at scale
Macro & Overnight
World markets remain relatively calm in the face of the atrocities in Israel and the potential repercussions in what amounts to faith in the diplomatic process underscored by Biden’s planned visit to Israel tomorrow.
One area where US diplomacy has gone into overdrive is repairing relations with Venezuela, where talk of an oil-for-elections deal has stabilised crude prices somewhat.
China undertook new measures to cap interest rates and improve liquidity, but there is a renewed focus on a Country Garden bond payment due this week.
UK Company Highlights
Frontier Developments updated and announced an organisational review to reduce operational costs by 20%, which mostly means people.
Shoe Zone announced that revenue grew by 6.1% to £165.7m in its FY update. It ended the period with 323 stores (closed 72, opened 35, refitted 15), said that it would achieve PBT not less than £16m, and planned to continue its share buyback programme.
Shoe Zone is a value retailer and sells c14.1 million pairs annually at an average price of £13. Like Card Factory, Wetherspoons, and Greggs in their verticals, Shoe Zone is a business benefitting from a strategy of scale economies shared. Done correctly, this is a volume strategy as volume gives pricing advantages from suppliers, in this case, the direct importation of containers of shoes directly from overseas manufacturers and avoiding the expense and complexity of wholesalers and intermediaries. This strategy is not just piling it high and selling it cheap. It is building a reputation for value for money and reinvesting its savings from scale back into the price, which is a much more challenging thing to do but is also more durable and sustainable.
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