Courts Asia

[d.o.g.]

I was of the impression that Courts was losing money and bleeding heavily before it was delisted back then, therefore I was surprised to see the numbers presented by d.o.g. Isn't IKEA still the world's largest (and unfortunately private) furniture retailer? How does Courts stack up?

The big losses came from Thailand. They never made a profit there except in FY05, and even then it was a paltry $45k on $18m of sales. In FY07 Thailand lost $19.6m and in FY08 it lost $20m. So at the Group level there were big losses. The scale of the losses suggests fraud, as from FY03-FY08 inclusive, cumulative sales in Thailand were $114m and cumulative losses were $43m.

Furniture retail is a really tough business. Your occupancy costs are high (furniture is bulky), your logistics costs are high (furniture is heavy) and your turnover is slow (people buy furniture infrequently). IKEA has a cost advantage in logistics because of the flat-packing they use. And of course they get a markup for design even when they use cheap materials.

Courts is selling third-party furniture so they cannot get the brand premium, and there is no flat-packing so logistics costs are high. Berkshire Hathaway does own a few furniture retailers, but to the best of my knowledge they are megastore operators. IKEA also uses megastores.

Courts is split across small-format stores, department stores, superstores and a megastore. Management resources may be spread pretty thin managing the different store formats, each with their own layout, inventory strategy etc.