The part owner of Zoe Foster Blake’s Go-To business, BWX, is in financial strife, but that’s not the fault of its deal to acquire the rest of her business for close to what the entire company was worth.
to buy a 50.1 per cent stake in celebrity Zoe Foster Blake’s skincare business Go-To it in August last year it was smiles all round.
But something had gone very wrong, very quickly. And it was not the onerous contract to acquire the rest of Foster Blake’s Go-To business for a cash outlay that was prohibitively close to BWX’s entire valuation, although it certainly added to the woes of the beauty and health products retailer. “Retail conditions have been challenging and changing, putting more pressure on our retail partners and ourselves with increasing inflation, price increases and interest rate increases,” Gration explained to analysts and investors on a conference call following the capital raising announcement in late June.
“We are talking about four weeks of revenue out of the business,” was how Gration explained the inventory and sales hit which he said would ensure it was “no longer a famine to feast model”. And this leads us to the Zoe Foster Blake and her right to sell the rest of Go-To to a financially stricken BWX.
It represents a double-edged sword for BWX. A slashed valuation for Go-To confirms it paid too much for the business. But a strong performance by the beauty brand could increase the massive cash outlay itfaces to buy out Foster Blake. The company is already paying $10 million of the recent cash it raised to its lenders, which will allow the embattled group to breach debt covenants this year.
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