If it ain’t broke, don’t fix it.
There’s a reason that saying is popular, and here’s another example of why it so often rings true.
Famous Brands is the parent company of both Wimpy and Steers, and most South Africans know that those chains print money day and night.
Then, back in 2016, Famous Brands decided to purchase GBK (Gourmet Burger Kitchen) for R2,1 billion.
They were pretty stoked with their purchase of the UK-based food retailer, having saved big when the pound devalued compared to the rand because of Brexit concerns.
All good, except for what came next. Here’s Business Insider SA with how this one unravelled:
Later Famous Brands would come to blame Brexit, and various other financial woes in the United Kingdom, for GBK’s continuing poor performance – which saw an exodus of unhappy shareholders.
Wimpy sells a standard burger for R50. Steers make a huge three-patty burger (with cheese) for R87. At Gourmet Burger Kitchen a speciality buffalo-meat burger, with “baconnaise” and Red Leicester cheese, is £11.35, or just under R190.
Stick to what you know, guys. Thanks to the rotten performance of GBK, Famous Brands has taken a serious hit:
In total it could write down a combined R449 million on its books against Gourmet Burger Kitchen (GBK), Famous Brands said in a mandatory note to shareholders on Thursday morning.
The impact on its results will be so big that it was required to make the disclosure as soon as it became aware of it.
The impairments will see a decrease of at least 20% in its earnings per share compared to the previous year when it reports on its results to the end of February, Famous Brands said.
The company’s share price dropped more than 8% after the announcement.
Yup, you tried to get fancy and it bit you in the arse.
Also, can someone have a word with Nando’s? I get that your advertising is all the rage, but maybe you should look at your pricing because you’re punching well above your weight.
Less money on politically relevant ads, more time spent trying to keep your prices in line. I’ve headed to Afro’s Chicken – just sayin’.
[source:businsidersa]
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