Q: Good morning 5i team
My question relates to concerns raised about DOL's relationship with Dollar City.
The following appeared on a well-known security trading web site: "On October 31, 2018, Spruce Point Capital Management published a report .... that highlighted ..... purportedly "questionable accounting and governance practices that cast doubt on management and the underlying health of the business". Specifically, <among other points mentioned> the report asserted that "management appears to use aggressive FX hedges and an off-balance-sheet relationship with a Central American retail affiliate to boost margins in a non-transparent way."
Separately, DOL's 2018 Annual Information Form says on Page 8 that as part of their South American biz development strategy, "Under the terms of the Dollar City Agreement .... products are sold to Dollar City at cost, except for a small handling fee charged on shipments that transit through Dollarama’s facilities."
How should one reconcile this apparent conflicting information? How might margins be "boosted in a non-transparent way?" as the short-seller alleges? Or should the words "purportedly" or "appears to" scream out "BEWARE" in this report?
Finally, what does 5i think of investing in DOL in today's economic environment?
Thank you for your comments.
Edward
My question relates to concerns raised about DOL's relationship with Dollar City.
The following appeared on a well-known security trading web site: "On October 31, 2018, Spruce Point Capital Management published a report .... that highlighted ..... purportedly "questionable accounting and governance practices that cast doubt on management and the underlying health of the business". Specifically, <among other points mentioned> the report asserted that "management appears to use aggressive FX hedges and an off-balance-sheet relationship with a Central American retail affiliate to boost margins in a non-transparent way."
Separately, DOL's 2018 Annual Information Form says on Page 8 that as part of their South American biz development strategy, "Under the terms of the Dollar City Agreement .... products are sold to Dollar City at cost, except for a small handling fee charged on shipments that transit through Dollarama’s facilities."
How should one reconcile this apparent conflicting information? How might margins be "boosted in a non-transparent way?" as the short-seller alleges? Or should the words "purportedly" or "appears to" scream out "BEWARE" in this report?
Finally, what does 5i think of investing in DOL in today's economic environment?
Thank you for your comments.
Edward
