There is another thread specific for Reitmans but there is the smell of blood and will take it from here.
https://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/ret-reitmans/msg273985/#msg273985Long story short: Long story and very competent managers but retail is tough and all good things must come to an end.
Short-term problems are turning into intractable issues and I think that, given the present momentum, the turnaround will be very difficult.
This is a first shared shot at it and expect to potentially meet interesting entry points in the next few months.
3 scenarios:
1-They sell or turnaround the maternity segment and somehow save the brand; then market price should converge to book value.
2-They try and try and this becomes a value-trapped melting ice cube with accelerating negative cashflows (the transition from slow to fast may be short)
3-They decide to enter BIA, define a SISP pathway and rapidly liquidate through a receiver (the Danier Leather story)
For scenario 3, comparing Reitmans now to what Danier Leather looked like at the end of 2014 is instructive. There are balance sheet differences but IMO differences tend to cancel out in terms of the liquidation value. I assume Reitmans could terminate or assign leases in a similar way. I come to a liquidation value of +/- 1.40 per share if things go south in the next 6 months. I assume the liquidation and distributions would happen over a two-year period.
That's it for now and will reconsider with further developments or if/when share price goes below 0.70.
