@Slew

Thanks for giving your input. I love this part of the Strawman community.

“Step one could be viewed as marketing machine who do not control their manufacturing and I appreciate the comparison to A2M but I’m not sure it is relevant in the textile business.”

I used this comparison really to accentuate the extent to which Step One’s business model is solely focused on marketing which is particularly relevant due to the amount of analysis I do on how much capital the business requires/consumes.

Yes, the majority of businesses in the ‘textiles’ space outsource this business function.

As I wanted to highlight it translates to higher operating margins and less capital consumption (upfront) while foregoing a lot of risk.

In terms of highlighting A2milk, yes the businesses are very different but my purpose was capture the limelight of outsourcing manufacturing/distribution by companies on the ASX. Something I believe was made notable by A2M.

“If the website traffic is generated from direct brand searching, I’m unsure if the google algo will have such a big impact?? I’ve noted Reece thinks this may be an issue with SEO”

You can very well be right here, it seems a guessing game with regard to how much capital is allocated to what. I’m sure management would be able to answer this question if put forward to them.

Perhaps I am over-emphasising the risk posed by SEO.

Let’s assume that SEO sales tend to be ‘first-time’ customers of Step One. This still represents >50% of sales and implies that google algo changes pose a threat to some of those sales.

Of course this may not necessarily be the case, but the fact that such questions are being posed seems a problem to me.

To answer question #2 - refer to the above snapshot taken from the prospectus.

R.e Womenswear

Yes, a good near term catalyst. I certainly wouldn't bet against sales growth in the short/medium term when you consider the amount of money being spent to market the product.

But how much of this growth is priced in? Certainly some of it is when you consider the >16x EV/EBITDA valuation of the company.

(When mature I'd assume STP would trade somewhere around the 8x ev/ebitda range).

An important question to be asked - how many loyal customers will the business capture through this marketing spend?

If the % of return customers dramatically increases from 45% up to something like 65-75%+ then I think my perspective would change. Otherwise I believe the sustainability of the business model would be brought into question.