The honeymoon is over and reality has kicked in at beleaguered Dobbies garden centres, as full year pre tax profits fall 11.7%.
On top of this worrying decline, the company says it is to seek a further £150 million by way of an open offer, discounted to existing shareholders by 8%, of yesterdays closing price.
The whole garden retail industry will be shuddering at this dramatic drop and many will see this decline as a worrying indicator that the demographics have shifted - possibly forever.
Dobbies, which is 65% owned by the supermarket giant Tesco, became the centre of a bidding war and dispute last year when Sir Tom 'Crocodile' Hunter blocked a full takeover and de listing.
However, the tug of war for Dobbies, came at a time when the overall luxury market were peaking and the unwelcome attention, (from Tesco's perspective) sent the shares to an all time high, with Tesco ending up paying top dollar.
"It is my view, with the downturn in sales, unsettled outlook for the garden retail business and leading into the winter that the Dobbies share price could fall to near pre-bid levels."
Well, my post of August last year was spot on and indeed, sentiment and market conditions have worsened dramatically. The share price is well below the bid level and indeed way below the spike (see chart above) of June when the price came close to the dizzy heights of £19.00 - are these guys really visionary businessmen?!!
I don't want to say 'I told you so' but this deal was all set up for disaster and in my opinion that view has been vindicated.
So what from here? - I still get the feeling that garden centre managers have got their head still stuck firmly in the sand and only now are starting to address the reality, that things are getting tougher.
Those that started to change 2 years ago to cater for the market are the wise ones and those that chose to respond, retrospectively, are struggling.
We have touched on this recently with the post "Is extended trading hours the answer to the garden industry decline?" which led to a number of comments.
As consumers, do we need to continue to spell this out? Return the garden centre back to a gardening 'experience' with the focus on plants and their production.
The consumer needs an adventure of natural discovery when they walk through the doors, pot-pourri should be on the shelves of Boots and not just inside the door of the garden shop.
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