This investor likes Groupe Dynamite right now

StoneCastle Investment Management president and portfolio manager Bruce Campbell told BNN Bloomberg’s Market Call on April 29 that Groupe Dynamite (Groupe Dynamite Stock Quote, Chart, News, Analysts, Financials TSX:GRGD) remains an attractive retail growth story after a recent pullback.

Campbell noted Groupe Dynamite has about 300 stores, with just under 200 in Canada and the balance mainly in the U.S., while its U.K. expansion is still early.

He said the company’s inventory turnover and margins stand out against retail peers.

“Somebody like Aritzia turns their inventory over maybe three times a year, whereas Groupe Dynamite turns their inventory over nine times per year,” Campbell said, adding that its EBITDA margin has been in the mid-30% range while many retailers are closer to 20%.

Campbell said a recent secondary offering, in which the CEO sold part of his position, has weighed on the stock after it had been hitting new highs. He said that pullback may create an opportunity, noting the company also bought part of the offering itself.

The investor also pointed to capital allocation, including a special dividend paid late last year.

Campbell said the main risks are consumer spending and fashion trends, particularly as the company operates at a lower price point.

“They’ve been very good with their two brands, attracting and being on top of all the trends,” he said. “But we’ve seen what’s happened with other companies like Lululemon, where competition comes in or they’ve missed the trend.”

Groupe Dynamite shares have gained 560.3% over the past 12 months. Of the analysts covering the stock, 13 rate it “Buy,” with no “Hold” or “Sell” ratings, and the consensus price target is $107.33.

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