Tuesday, September 3, 2013

Le Chateau Inc

On my other blog I am today writing about limiting your exposure when buying stocks...continue...

I do not own this stock Le Chateau Inc. (TSX-CTU.A, OTC-LCUAF). In June 10, 2012 I started spreadsheet because of a request from Blog reader. It was also on my list of dividend and special dividend paying stocks. Jennifer Dowty wrote a column on Dividend Paying stocks in 2010. Jennifer is now a Portfolio Manager for Manulife Asset Management Limited. The title of the article in Investor's Digest was Dividend Stocks: Buy, Hold and Collect. The Investor's Digest is a publication of MPL Communications. See publications on their site.

Currently, this stock is not doing very well. It stopped its dividend payments in 2012 and I am not sure anyone would guess on when they might restart. The years of 2011 and 2012 are years of losses. The first quarter of 2013 showed a loss also. There are no longer any analysts following this stock. Their last good year was 2009.

This is a potential problem when buying retail stocks, especially one in fashion wear. And, who knows if or when this stock will turn around and again be a dividend growth stock, which it was since 2005. It started dividends in, as far as I can tell, in 1994, and then increased them for the first time in 1998, the next increase coming 6 years later in 2005. Between 2005 and 2011 dividends increased each year. They paid special dividends in 2007 and 2009.

The strength of the stock has been the strong debt ratios. The Liquidity Ratio for 2012 is 2.79 and the 5 year median ratio is 3.03. The Debt Ratio in 2012 is 2.74 and the 5 year median ratio is 2.91. The Leverage and Debt/Equity Ratios for 2012 are also quite good at 1.68 and 0.68.

The other thing to note is the large insider ownership. The CEO owns some $30M of shares as does the founder of this company. There are two types of shares, Class A which has one vote per share and Class B that has 10 votes per share. The CEO and Founder own these shares. Barry Gruman also holds shares worth some $22M. Barry Gruman used to be an analyst at First Marathon Securities Ltd.

There is an interesting article on this company in the Canadian Business magazine. It talks about this company having flirted with disaster before and has come back. Insiders are sure that they can do this again. They are buying shares. In 2012, the company got a $10M loan from the company's founder Herschel Segal in this report from The Chronicle Herald. The company also got a line of credit from GE.

However, you look at this stock, it is a turnaround situation. Will it turn around? Insiders are saying they will make this happen. See my spreadsheet at ctu.htm.

Le Chateau is a Canadian specialty retailer and manufacturer of contemporary fashion apparel, accessories, and footwear at value pricing for style-conscious women and men of all ages. The Company has 231 retail locations, of which 227 are located in Canada and 2 in the New York City area. They also have 7 stores under license in the Middle East. Its web site is here Le Chateau.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website for stocks followed and investment notes. Follow me on Twitter or StockTwits.

1 comment:

  1. Peculiar article, exactly what I was looking for.