That's a fair point re valuation @Tom73

But I'd counter that Blundy selling down was a massive red flag. He knows retail like no one else in Australia with the exception of Solly Lew.

To be honest, when I see LFL sales running at 0.9% with the CPI closer to 4% and costs for business going up everywhere it leads me to think that the Sports Direct tie up was in many ways just about finding some top line growth because of a lack of pricing power in the existing brands. I don't know if SD will work in Australia, so it would have to be a wait and see.

So yep, in a sense they don't need to do much to get a pop in the SP but the business looks a bit challenged and retail is a sector where you can get found out.

(Sorry I am on a plane and the WiFi is sketchy, I had written a longer post but the internet dropped out right as I was uploading it!)

Agreed @UlladullaDave

In addition, my expectation is a few very rough years ahead for the The Athletes Foot segment of the business. Whilst they dont break out TAF in detail, my guess is it's at least 1/3 of their sales and profit numbers.

Over the past few years they have aggressively been kicking out franchisees and taking over the stores as company run operations. In the first year, that will likely look OK, as you get rid of the profit margin the franchisee was keeping. So they likely report an increase in earnings YOY in those locations.

It's the few years after that when the problems start. You have got rid of a family (quite often husband and wife and even sometimes adult kids) that have worked their butts off over many years to grow their stores. They attend all the local running events and marathons, tie in with local schools etc, etc. And they care deeply about their business. As that store switches to a company run operation, with a moderately paid and motivated manager, the chances of replicating franchisee level success are very low indeed. I know all of this first hand as a supplier to the TAF for many years. And the 15 or so company stores they had before this strategic change, always underperformed a similar franchisee store.

So it wouldn't surprise at all to see TAF store sales and profits actually going backwards, YOY, over the next few years. And that means even the current multiple might be generous as group earnings flatline or possibly decline...