The markets are taking another big slice out of value butcher Crawshaw (CRAW:AIM) on Thursday, the stock crashing 40.1% lower to 3.65p on a warning full year sales will be flat and the board expects to report widened annual losses of around £3m.
This just the latest setback for Rotherham-headquartered Crawshaw; the budget butchery chain’s like-for-like sales have come under severe pressure in recent years and CEO Noel Collett, a former Lidl luminary, left the business alongside numbers man Alan Richardson earlier this year.
COMPETITION REMAINS CUT-THROAT
In a short update ahead of first half results (26 Sep), Crawshaw concedes the trading performance of its high street shops ‘continues to remain challenging’, with rising shop rents, high business rates, lower consumer footfall and ‘increased discounter competition’ hitting sales and profitability.
Facing into soft consumer sentiment and beset by competition on all sides, thee fresh meat seller says half year like-for-like sales slumped 13.2% and group sales for the half weakened to £21.6m (2017: £22.1m) and an underlying operating loss of ‘approximately £3m’ is now on the menu, wider than last year’s £2m deficit.
Investors of an optimistic disposition may find some succour in the £3.3m cash on the balance sheet as at 29 July, albeit down from £4.7m at 28 January, which gives Crawshaw a fighting chance of funding a comeback.
‘The new leadership team who joined the business in late May have identified the core issues affecting the business and will announce how it plans to rectify those issues and drive the business forward with its interim results,’ reads today’s update from Crawshaw, which has ‘maintained margin investment in response to the continued competitive environment.’
In plain English, that means margin-eroding price cuts.
In an AGM trading and strategic update issued in June, new CEO Jim Viggars, who formerly headed up Asda’s fresh meat department before being fired in 2015 for gross misconduct in connection with breaches of Walmart’s expenses policies, lamented the challenges facing Crawshaw’s high street shops.
Yet encouragingly, he pointed out Crawshaw is rebalancing its portfolio away from its historical dependence on high streets and towards its successful factory shop format, on which Crawshaw’s long-term profitability hinges.
Stressing the micro cap’s strategic partnership with poultry supplier 2Sisters was ‘delivering the expected customer and financial benefits’, Viggars insisted ‘our factory shops continue to perform well, and I am confident that repositioning the group towards the successful factory shop model will strengthen Crawshaws’ position as the country’s best value butcher and improve the long-term profitability of the business.'
