Takko: in the world of lockdowns

All,

We have attempted a stress test of Takko in the world of store closures. Please find our detailed model here.

Clearly the company will breach covenants, but what about liquidity:

We have not assumed any permanent store closures.

We assume that there will be no more lock-down after summer and thus a gradual recovery of business beginning with the AW season, if still impaired in overall demand volume.

We have assumed a total number of 4 weeks of lock-down as well as further weakness in demand with the resulting margin impairment in the remainder of the SS season and demand only slowly recovering in the following two years.

We have assumed only a marginal ability to shed staff and a rise in marketing costs.

In a scenario where all four weeks of lockdown would occur this quarter, Takko would run down to zero cash (RCF fully drawn) as soon as April.

Takko only have a small online business covering some 15% of turnover in a good week. Liquidity is strong, but its also the time of big WC outflows in the run-up to its prime season: Easter. Coupon is due right after that in May. Moreover, if last week is any guidance, there may be less pent-up demand when stores open again than one might have thought.

Given high liquidity, on balance we assume that Takko mange to clear the first hurdle and survive through the coupon period. If so, and in particular if further lock-downs allow for a breather in between, Takko should have enough cash to withstand the above scenario - just. 

Meanwhile, the company may be "considering participation in the announced national and regional aid programs for affected businesses until normal business operations can be resumed” (statement copied from Douglas’ press release just now.

Wolfgang