Q: Good Day To All:
Further to my recent question on Reitmans, I am having difficulty with your comment of the cash on the Balance Sheet. You state that Cash offsets debt. My information( which may be incorrect, and is my reason for following up with you ) is that they have approximately $ 100 m of cash. The inventory more than covers the accounts payable making an acceptable current ratio. The lease liability in accordance with GAAP will be covered by future operations. The only risk I see is that the same board which let them go into bankruptcy may decide to take them private at a low share price. Your comments please. Thanks for your previous helpful comments. Also you state that they pen out quite well using ROE. It would look even better using ROIC considering the cash on hand. There are also tax losses to be carried forward.
Thanks, ben.
Further to my recent question on Reitmans, I am having difficulty with your comment of the cash on the Balance Sheet. You state that Cash offsets debt. My information( which may be incorrect, and is my reason for following up with you ) is that they have approximately $ 100 m of cash. The inventory more than covers the accounts payable making an acceptable current ratio. The lease liability in accordance with GAAP will be covered by future operations. The only risk I see is that the same board which let them go into bankruptcy may decide to take them private at a low share price. Your comments please. Thanks for your previous helpful comments. Also you state that they pen out quite well using ROE. It would look even better using ROIC considering the cash on hand. There are also tax losses to be carried forward.
Thanks, ben.
5i Research Answer:
On companies we do not cover we defer to Bloomberg data, and it considers leases to be obligations. This can be argued, but is the more conservative approach, certainly. Leases are obligations and do cost cash to 'break'. RET had $97M cash as of its last statement. But yes, tax losses can have value, and the company is not likely to pay much tax for years. We would disagree than the 'only' risk is a privatization. Sales fell 6% in the last quarter, driving profit down by nearly two-thirds. The retail environment could change. The company's brands could deteriorate. There is trading liquidity risk. The stock is down more than 50% since February so we would still consider it risky overall for most investors.