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Pittards (LSE:PTD) has, so far, shown no great ability to generate wealth for shareholders. Perhaps things will be transformed in the future by excellent strategy carried out by excellent managers.
Strategic position
The main business is pumping out millions of hides and skins for other manufacturers to turn into useful goods, such as running shoes or handbags.
Leather production is commoditised. Just about every year Pittards directors complain of “challenging market conditions”.
Of the last year they say “Demand in our core markets of shoe, sport and dress gloves remains depressed and we now believe that after four years of contraction, the dress glove market has rebalanced at this lower level.”
In the UK there are 23 tanneries competing for business, let alone the 1,000s abroad.
Moving upmarket?
A small percentage of sales comes from premium priced products. They are trying to build the “Pittards England Collection” in places such as Japan.
Daines & Hathaway branded product is now available in the luggage department of Harrods, e.g. “luxe full leather overnight bag”.
Clarks Village, which receives 4 million visitors a year, now has a Pittards store selling Pittards “gloves made from our signature soft heritage leathers as well as bags and accessories”.
Handbags which sell for hundreds of pounds and other luxury products are perhaps the way to go to build shareholder value. Indeed, one of the directors used to be CEO of Mulberry and still sits on Mulberry’s board as chairman.
Pittards see their core strengths as “heritage, integrity, innovation, customer service and reputation.” But they do not go as far as saying that there will be a major and sustained push in the direction of upmarket branded product.
The only strategic direction statement I could find in the latest annual report is: “we anticipate a greater percentage of our business to be based upon hides rather than skins, as a result of greater growth”. This is not exactly analytical in terms of potential competitive advantage, industry analysis, return on capital employed and shareholder value.
On day to day management they are trying to tighten up. They have set “greater emphasis on” (without setting numerical targets):
•Return on capital employed
•On-Time in Full. This is to do with logistics or delivery performance within a supply chain. It highlights whether the company delivers on its commitment to customers.
•Inventory days of stock. They clearly think they might be over-stocked relative to sales. Some zero-based budgeting wouldn’t go amiss here
We’ll have to wait and see what a “greater emphasis” will bring on these.
They are also looking to widen the range of customers they supply, identifying interiors and general footwear as additional potential markets.
The directors
The director’s financial interests are a little aligned with those of other shareholders, but, given their high salaries relative to the shareholdings, the alignment is not very strong.
Reg Hankey, 61, CEO
Joined Group in 1990. Been CEO for 9 years. Presided over a decline………………To read the rest of this article, and more like it, subscribe to my premium newsletter Deep Value Shares – click here http://newsletters.advfn.com/deepvalueshares/subscribe-1
