Tesco shares have collapsed by 43%, Morrisons is down 33% and Sainsbury’s share price has fallen by 30% during the past 12 months, as anyone that matters, knows...
Given that most key executives are remunerated in part with share options, it follows that optimising the share price has to be high on the agenda in the mults. This means that understanding share price drivers can add another dimension to a NAM's insight, and negotiating repertoire...
First, the professionals want to ensure that the value of all the cash, stock and property owned by the company is worth more than the current share price, i.e. Market capitalisation.
Second, they try to get an estimate of future earnings, in order to judge the likelihood of getting some part of what remains after the other creditors have been paid.
All of this can be driven by the retailer's ROCE, the ultimate measure of profitability, a KPI that can be directly driven by the NAM's bag of brands...
Still feeling that the share-dimension pits you against the experts overmuch?
If so, it should be kept in mind that most shareholders and their advisers study open domain data in arriving at their perception of what a share is worth. Their experience of retailers as businesses is usually confined to shopping in the aisle, whereas NAMs actually work in the engine room, negotiating with the guys that drive the business. This means that a stock market-literate NAM can possess a level of insight that far exceeds that of a NAM limited to ‘the five selling-points that make our brand unique’.
Incidentally, one way of adding some immediacy to a NAM’s share-price sensitivity is for a supplier to authorise the purchase of £100 of shares in the NAM’s retail account, on expenses. Nothing beats owning a piece of the customer to add focus…
However, the NAM should be forbidden from owning much more than £100 worth, to avoid any temptation to use Trade Investment or improved credit terms to add value to the share price (!)
No comments:
Post a Comment