Heather Dorniden was leading the 2008 Big 10 Indoor Track Championship when she fell flat on her face and the other runners ran ahead. She got up, focused on her strides and persisted, eventually overcoming her adversity and winning the race.
After taking over from the previous management who diversified horribly from their core operations and the business suffered two straight years of losses, Mr H led his team of 3,000 staff to a great comeback, increasing their revenue by 50% and operating income by 300% in the past ten years.
Critically, during the aftershock of the Great Financial Crisis, when the business was making a loss, Mr H went against conventional wisdom and decided they were not going to layoff a single employee.
Mr H decided to open more smaller format stores instead, focusing on service-based recurring income streams rather than the traditional product-based business they have grown comfortable to.
Following the successful turnaround, Mr H kept laser-guided focus on their capital flow, making highly aligned decisions to pare down their heavy debt until the company is debt free today, while increasing their dividends for ten consecutive years. All these, while the company went on to open another 300+ stores to become the number one service operations in the industry. We think they still have room to grow organically and their balance sheet is truly strong and allows them to be flexible. Based on their dividend policy, we think there is a strong chance they can increase dividends by 60% next year.
Their share price has risen about 500% over the past decade so far, but the market continues to price them at single digit valuations. On top of that, they are priced 45% to 200% cheaper than fellow best-in-class peers around the globe.
We think they have a strong future to grow into, especially if the landscape continues to be disruptive, and if the next crisis were to hit tomorrow, they will grow only stronger. Rare find indeed.