Gibbons Diversification To Reduce Company's Stamp Sales

Gibbons is expanding further into coins, antiques and other collectibles. Evidently, the leading company in global stamp sales plans to shrink its stamp business from the current 50% of overall revenue down to only 10%.

Seems this business decision likely points to shrinking demand for collectable stamps which would stifle growth for the publicly traded Gibbons. But with far fewer stamp deals being handled by this leading firm, will there be new opportunities for other dealers, or for direct sales online via auctions? What do ya think?

Article in Linn's: http://www.linns.com/news/stamp-mar...rket-turmoil

I think we need to be careful in interpreting this. If a company makes £2 million profit, and £1 million is from stamps - that's 50%. But if they make £10 million, as a result of selling coins and collectibles as well, and still make £1 million from stamps, that's "down" to 10%. But the stamp sales are the same - in fact, they could go up, and still drop as a percentage of total profit.

You make a fair point. But typically publicly traded companies don't reduce their market share or product mix in areas that generate the higher percentages of the company's profits. The Stanley Gibbons CEO indicated that stamps currently represent 50% of company revenue; and that will be managed downward to 10% of revenue. The reasons why such diversification would be implemented include a) other collectibles are growing in global sales faster than stamps, b) other collectibles generate higher profit margins than stamps, c) investing company resources into other collectibles is expected to generate sales growth to meet revenue targets. Since I know very little about Gibbons, I'll check out their annual report to learn more.

What is Stanley Gibbons all about without mainly dealing in stamps?
In other words, is Stanley Gibbons known more for stamps than anything else or not?

Ringo is correct that SG can grow their way out of the stamp business, but a reduction from 50% to 10% of revenues would be a lot of growth.

Q/ What part of the business might they get out of?

SG are publishers, auctioneers, retailers.

Since they speak well of the opportunities in other collectibles, I would expect them to continue their stamp auction business.

They could license the catalog/album publishing to another specialty publisher. This would reduce that portion of their overall revenue that comes from stamps without sacrificing their influence on the hobby. But maybe they make good money from the catalogs, and the album business can't be all that big, can it?

That leaves retail, which is where I think they will be making any cuts. Most of their inventory, even if it is holding its value, is a 'dead' asset in terms of their financial results, and has maintenance costs. Meanwhile, on the operating side, retail order fulfillment is labor-intensive.

The question would be how a major player gets out of the retail business without crashing the retail business and, therefor, the value of the asset(s) they are selling.

One answer would be a buyer for their retail business - lock, stock & barrel.

An aspirational billionaire would be handy, right about now; did Paul Allen collect stamps as a kid? Larry Ellison?

Enter Bill Gross (PIMCO):

http://www.forbes.com/forbes/2010/1...lecting.html 2010 in Forbes

http://blogs.wsj.com/totalreturn/20...s-stamp-act/ 2013 in WSJ

http://www.marketwatch.com/story/wh...t-2014-06-19 Why stamps are bond king Bill Gross's favorite investment

http://www.williamhgrosscolections.com/ The William H Gross collection

http://postalmuseum.si.edu/stampgallery/ The William H Gross gallery

I can see it now: "Well, I like collecting stamps, and SG's entire inventory was the biggest stamp collection I could find."

Cheers,

/s/ ikeyPikey

ikeyPikey, you cracked me up! I was going to make Gibbons an offer for their whole stamp inventory, but our teen daughter will likely need a car this year.

Here are reported financials from Gibbons filing for 15 months ended March 31, 2014:

Profit margin realized by product segment:

Philatelic 22.8%
Publishing 21.1%
Coins & Military Medals 17.5%
Other Collectibles 13.1%

I find it interesting that stamps produced the highest profit margin. So, to Ringo's point, perhaps Gibbons does envision huge growth in sales of non-stamp collectibles while stamps remain at or near current sales volume.

Company has stated its strategy is to maximize their total sales across collectibles to their high-net worth customers. I get the idea that the company isn't focused on me or the "average" stamp collector. But if Gibbons has sold $50,000 of investment grade stamps to an individual, their strategy says Gibbons could potentially generate additional sales revenue by offering that same collector wider access to antiques, jewelry, coins, and sports memorabilia.

Interestingly, Murray Payne and Apex Philatelics have become trading subsidiaries of Stanley Gibbons in the last year. I don't see SG ever moving away from stamp sales, just diversifying their business portfolio.

I agree, and the announcement is probably more about calming nervous investors by linking a profit warning with an indication that you're doing something to address it.

Moreover, note the details of the announcement: "the share of firm revenues coming from high-end stamp dealing should drop to around 10 percent as a result of diversification, including growth in worldwide collectibles auctions and commissions from its online marketplace." Emphasis on "high-end" declining. Another part of the article notes that they failed to complete a "£1 million sale of a coin to an American collector, who failed to pay" and refers to a "perfect storm of failed deals." This tells me that they have concluded that they cannot be dependent on a small number of very high-end deals to drive profits. The million-pound sale is pretty hard to forecast when you are a public company, or rely on. Instead, they need to do more volume across all businesses, including BidStart, which is a lower-end business. That sounds good for the average collector.

I don't see Bidstart doing 5000 pounds or dollars a month in total business, much less profit. The place is a trainwreck.

chasa, sounds like you're turned off big time by Bidstart.
Until I read the company's news release I didn't realize that Gibbons owned Bidstart.
The release indicates that the website has gone through a significant redesign that should
go live this month I believe.

SG has been in the business a long time; it could be that they are carrying their inventory at the price they paid decades ago (generally the most trustworthy method) and are enjoying (unsustainably) high margins on their stamp sales.




Yeah, I could see how you could miss that, Old Guy.

Cheers,

/s/ ikeyPikey

I'm not turned off to Bidstart, and I hope it improves. They are mostly buy-it-now these days and what that usually means is sellers start at one-notch [or one order of magnitude] above what anybody would want to pay [and nothing sells, with free re-runs of stuff that will never sell]. I prefer an ebay model where everything starts at a buck and the chips fall where appropriate.

I bought 2 items on Bidstart about 2 yeasr ago. The Cap over left 2 Washington and the Cap over both 2s Washington. For the following 6 months, until I got around figuring out how to turn their spam off, I would get several emails a week showing me more Cap over 2 Washingtons. Not something similar, not something different, but the same 2 stamps I had already bought.

Funny you mention that. A lot of the ebay ads that flow through my Facebook stream are of items I have listed for sell. The actual items I listed.