Fish & Co Express and Starbucks selling instant coffee

In the tough time likes this, when consumer scale back the spending, business has to adapt and change. The traditional food and beverage sector is also affected, because people refrain from eating outside often.

Fish & Co Express was launched for the company to go into fast food business. This is a different business segment where most dominated by establish by fast food brand like Mac and KFC. Fish & Co guess its brand and taste would make it an attractive proposition for consumer to try its burger. Therefore, the Fish & Co Express was established at Downtown East. It is expected to draw the young crowd who fancy fast food and might not frequent the restaurant.

If Fish & Co can maintain the quality of the offering, this can be another way of bringing in more revenue. Time would tell whether this venture would succeed. I think the critical success factor of any business is whether do consumer get value for money.

On global front, we know Starbucks is running into trouble. Many outlets were closed in the rationalisation exercise. Those losing money or under performing outlets are closed and they urgently looking ways to boost the business. People used to believe that Starbucks is an affordable daily luxury that people cannot live without. The recession proves this belief is wrong.

The new product Starbucks wants to launch now is actually instant coffee. If you look at the market of instant coffee, it is growing. More people having the cup of instant coffee whether at home or office. Maybe because of the slowing business, they are trying to target this new market segment. Won't it be great if you can enjoy a cup of affordable premium coffee at home? Brand consultant questioned this move, whether it would erode the brand. It is a double edged sword, you could be gaining new customer but losing existing customer who sit in the cafe.

Business change everyday and a good management is out to act prudently to keep the company afloat and try to grow the profit. I am still an equity person and believe in stock investing.

FJ Benjamin FY09 Q2 result

FJ Benjamin just announced the Q2 result for FY09.

Turnover -10%
Gross profit -14%
Other income -66%
Rental +10%
Operating profit -53%

>> Retailer seems to be caught in situation where there is plunge of sales but rental keep going up.

Forex loss of 2,345,000
Net profit -93% to 611,000 only

>> The luxury sector really get hit when economy turns bad.

Current liabilities (in '000)
Trade and other creditors 74,183
Bank borrowing 58,358

Debt repayable within one year 58,389
Minus cash on hand, outstanding debt 37,392

Cash before working capital 3,500
Cash used in operation 13,332
Cash at end of period 11,150

>> Cash are locked out in two items - increase in debtors and stocks. The negative cashflow is really a cause of concern.

EPS for Q2 0.11

According to explanation, profit -53% plus unrealised non-cash forex loss of 2.3mil for trade payable and other balance. At current economic situation, the forex fluctuation is going to be constant issue. Margin decreased slightly as promotional activities increased. The group business affected by the downturn, as consumer cut back spending, and promotional activities increased. Revenue in China -35%.

It is really not time for retailer, many thought that luxury sector should be less affected, but it is not. The negative cashflow is really a big concern to me, especially time is bad now. Assume EPS remain same across quarter, full year EPS would be 0.44. But this figure is not so meaningful, since the business would keep deterior affected by consumer willingness to spend.

Ox year investing

While we were busy celebrating the Ox year, the news was busy reporting retrenchment news. It looks like the economic and business is going to get tougher in coming months. I expect the subsequent 6 months, we would have more pain. Consequently, stock market might have room to fall further. Somebody say he see no light at the end of tunnel yet. So, this is not the time for bargain hunting.

During the holiday, I also took time to re-read the book The Warren Buffett Way. I think every time we read a book, no matter how many times we have read, we stand to gain something. It kind of remind me of the fundamental principle I am trying to practise till now. People are fearful now, shouldn't we be a little bit greedy? Of course, this is not ordinary down time, we are in a serious crunch time. But once the strong company get over this, it would perform you in recovery time.

So, now is time, to read your books and further affirm your investment principle and strategy. Zoom down on your watch list, get it ready and finalise your strategy. When to strike and how to strike?