Luxe Holdings to sell off Arthur Kaplan and watch business

Jewellery retailer Luxe Holdings on Monday said it is in talks to dispose of the group’s luxury brand Arthur Kaplan, its World’s Finest Watches business, and other group assets under the Jewellery and Watch division in a related-party transaction.

The sale, if successful, will leave the group with NWJ as its only jewellery brand.

In a statement Luxe said it is looking to sell the earmarked assets to current group CEO Althea Gewar’s company Go Dutch for an unspecified cash amount. Gewar is the sole director and shareholder of Go Dutch.

“The proposed disposal, which will be subject to certain conditions, will provide the group with a cash injection to support the remaining operations and settle existing commitments in the business,” Luxe said in a statement.

Fall from grace

Independent analyst at Small Talk Daily Anthony Clark tells Moneyweb he is not surprised by the news from the group, as its decision to rebrand into a jewellery business in 2020 – at a time when consumers were wary of spending on luxury items – made no sense.

Prior to the rebrand, Luxe was owned by Taste Holdings, which was primarily a food business that owned Starbucks coffee and Domino’s pizza chains in the country. However, Taste fell on hard times and a decision was taken to shut down and dispose of the food business, leaving the group to focus on its jewellery business.

“As it stands right now, Luxe is no longer Luxe, it’s probably more like junk,” says Clark.

“Why would you want to invest in a purely jewellery business in a weak economy, when consumer spending is actually constrained?

“I’m utterly unsurprised that after all these shenanigans and all the rhetoric of rebranding, the name change and the share consolidation – which was again a disaster – that they are now selling off the core Arthur Kaplan and watches business to an insider.”

For Clark, it will be interesting to see how much value the group will get out of the sale of its assets in the jewellery division, especially since it paid approximately R85 million for its acquisition of Arthur Kaplan back in 2014.

Tough trading environment

The Covid-19 pandemic – as was the case with several industries – was not kind to the jewellery sector, as financial uncertainty saw consumers making more conservative spending decisions.

In its 2021 full-year results, Luxe reported a R73 million loss in sales as a result of the pandemic. However, a post-pandemic report indicated it was etching closer to a pre-pandemic recovery.

In a trading statement posted in July, the group said it expected headline earnings per share for the year ended February 2022 to increase by up to 149.2% to 39.52 cents, compared with the headline loss per share of 80.3 cents it reported in the previous comparable year.

However, more than two months later, the company is yet to publish its year-end results.

In August, the group made shareholders aware that it had identified “a number of transactions that were not accounted for in accordance with International Finance Reporting Standards (IFRS) in prior periods”.

As a consequence of this, Luxe noted that it would have to restate its annual results, meaning that the veracity of its aforementioned forecast remains questionable.

Around the same time, the trading of Luxe securities on the JSE was suspended. This after the company failed to submit its annual report within the four-month period following its year-end, as stipulated in the JSE’s listing requirements.

“As Luxe’s annual financial statements for the year ended 28 February 2022 (AFS) have not been published within the prescribed period, the JSE has taken a decision to suspend trading in all securities of the company with effect from 5 August 2022, as announced on Sens by the JSE today,” Luxe said in a statement at the time.

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