Shareholders of retailer Country Road Limited (ASX: CTY) will be smiling today at the 35% gain in the share price. Tallied up, since the company announced its half-year results on Tuesday, shareholders have enjoyed an impressive 105% boost in the share price.
In late 2012 Country Road acquired the iconic Witchery and Mimco brands. The addition of these brands to its portfolio largely explains the boost in revenues and profits for the group. For the half-year ending 31 December 2013, the retailer reported total sales up 27.4% and total profits up 71.7%. More importantly, comparable store sales growth was a solid 6.6% across the enlarged group and earnings per share were up 42.5% to 36.6 cents per share.
The problem for investors who are not already minority shareholders is the lack of liquidity in Country Road’s share register. The two major shareholders control nearly 99.8% of the company, leaving just 0.2% in ‘free float’. This is an extreme example of an illiquid stock, however the share price gain also highlights the advantage small investors can have over institutions in their ability to purchase small, illiquid positions in potentially mispriced shares.
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Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.
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