Fund managers say they are yet to be convinced about the merits of investing in Best & Less as it moves into the early stages of its plans for a possible initial public offering next year.
Chaired by former Just Group boss Jason Murray, Best & Less sells apparel and homewares in Australia and includes New Zealand apparel business Postie, which was bought out of administration in 2014.
Private equity owner Allegro Funds Management has drafted in Macquarie Capital for the float.
Fund managers have been told this week that baby and children’s clothing comprised of about 51 per cent of sales and the business was being pitched as a comparable to Baby Bunting.
Whether a deal gets done will no doubt come down to price, as is always the case, but some believe it could be a hard sell.
As is the case for most retailers, online sales have increased amid the COVID-19 pandemic, moving from 4.8 per cent in the 2019 financial year to about 9 per cent as of November.
But part of the problem for Best & Less when it comes to attracting the support of institutional investors is that it has been slow off the blocks in getting its online operations firing.
Best & Less has only started a click-and-collect service in recent weeks.
However, the argument is that next year is unlikely to show any unpleasant surprises, with its performance not dependent on COVID-19-affected conditions.
Best & Less has recorded sales growth from $605m in the 2019 financial year to $619m in the 2020 financial year.
For the last 12 months, like-for-like sales growth was about 8.5 per cent, to $629m.
The company has cut back the number of stores in its portfolio in recent years, with 186 Best & Less stores in Australia at November and 60 Postie stores.
The understanding is that the private equity owner’s aspirations are to list Best & Less for a price that values the business at about $400m.
Annual earnings before interest, tax, depreciation and amortisation for Best & Less are understood to be around the $55m mark.
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