The Thorn Group Ltd (ASX:TGA) share price was trading 54.32% higher today following news of its closure of 62 Radio Rentals Stores.
About Thorn Group Ltd
Thorn Group is a diversified financial services organisation which owns the Radio Rentals chain and provides alternate consumer and commercial financing solutions, consumer and commercial leasing products and fully integrated debt collection and receivables management.
Why did the TGA share price spike?
In an announcement today, Thorn said it will permanently close 62 Radio Rentals stores and selected warehouses, this is due partly to the Coronavirus (COVID-19) driven downturn in the retail sector as a whole.
Thorn reported that it will provide more than 300 full-time staff with redundancy packages. It will be undertaking a run-down of its Radio Rentals’ loan book, this is expected to be worth approximately $123 million as of March 31 2020. This should free up some much-needed cash for Thorn, above the redundancy and other costs.
The strategy will see Thorn move to an expanded presence online as they shift from the outdated business model. It will also see a change in product range to match that of the customer base.
Chief Executive Officer, Mr Peter Lirantzis, said “I am disappointed that we have been forced to make hard decisions regarding our staff and store network, however they have had to be made to ensure Thorn Group continues to operate and thrive in the future. We intend to re-develop both the Radio Rentals’ digital business model and Thorn Business Finance once the COVID-19 crisis has passed.
“The group presently has circa $40 million cash at bank and is actively pursuing a range of cost-cutting initiatives and recoveries, through which we expect to generate increased cash flow over the next year”, he concluded.
What Next?
Investors have seen slow declines in the Thorn share price over the past few years. Today’s announcement has seen the share price skyrocket as it shows a proactive move to help shore up some capital in this uncertain time in the retail industry. It may be a steep rise in the share price for Thorn today, but this time last year they were trading at $0.22, still quite a way from today’s high.
Personally, I wouldn’t be buying Thorn just yet, however, the following shares are much more tempting.
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