Originally posted by Stevey:
I only saw the consolidated P&L view and do not know results for Vintages only but according to their latest published Annual Report, results are improving year-to-year so I'm not sure where the "shitty records" are. I don't know who Tom Wilson is either but LCBO is not a normal business as the only game in town, so any reductions in sales volume of higher end products can be attributed to the economy and not to any loss in market share to which management may be responsible. And if Tom is concerned about his financials today then holding inventory for a few years isn't going to help his financials now and if you say he's been getting "shitty" results already, then he could be fired long before the '05's are back on the shelves in a few years, not helping him at all.
In other words, I just don't see how holding onto any '05 clarets can be of any help. It's a risk that even if prices do go up in a few years, how much higher into the stratosphere can LCBO mark up their bordeaux? Are we going to see $500 for the '05 Leoville Barton in a few years? Is there a price ceiling that above which the public will simply refused to pay? I don't know but I know, for me, the ceiling has already been reached.
But if the agent has inside information, then I guess he knows better.
I have to agree with Darcy. If the LCBO lowers the price significantly across the board for their 2005 bordeaux's they have to write down the whole value of them. That's a big paper loss. As you so rightly said, as the LCBO is the only game in town, they don't have to mark-to-market their assets/inventory against any other companies (they are
the market...)so they can afford to sit on those '05's as they "appreciate in value" or sit on them as they "ride through this economic downturn".
I think we also overstate the importance of this to the LCBO. Fine wine is important to us, but to the LCCBO, on the balance sheet of a few BILLION, the inventory of 2005 bordeaux is propbably less than $10-15 million or so.