One stock you probably haven’t heard of just popped onto the scene in the small-cap luxury goods space without much fanfare, but with a lot of surprising growth data, particularly in an economic context that wouldn’t seem – on its face – to lend itself particularly well to visions of new yachts and $50k watches. But there’s a twist here, and it’s interesting enough to pursue with a deeper dive. So, here goes.
The stock is Clikia Corp (OTCMKTS:CLKA).
CLKA trades on the OTC post-reverse-merger/reverse-split. So, yes, this is a “highly speculative” name. But it isn’t a Ninja stock (no income, no job, no assets). Not by a long shot. In fact, there are now significant operations and the company appears to be suddenly on track for well over $2 million in sales in 2020.
With a light float and shares clearly flying under the radar, this could get interesting.
For starters, the twist here is that this “luxury goods” company isn’t selling merely expensive stuff. It is selling rare custom luxury watches and jewelry – sales that happen “by appointment only”. As its CEO, Anil Idnani, noted in a recent shareholder letter, “People willing to spend $50K on a watch cannot accomplish that transaction on Amazon.com. The watch they want isn’t a click away. It is a relationship away.”
Because of that rarified air, its customers are also not really too tethered to the economic cycle. “Pandemic? What pandemic – Hey Hon, let’s just take the private jet to our fully-stocked bungalow in the New Zealand southern alps and wait it out.”
However, the company also just put out news that suggests there is some end-market diversification in its model.
The Duty-Free Market
Clikia Corp (OTCMKTS:CLKA) just announced another unexpected top-line number: the company has already pulled in over $300k in wholesale sales to duty-free outlets in Alaska, Colorado, and the US Virgin Islands so far this year.
For some perspective, CLKA hadn’t really made any money before this. So, the ticker is not associated with all these big numbers suddenly being thrown around. The key is the new wholly owned subsidiary, Maison Luxe, which came into the picture earlier this year. The growth is fully associated with this entity.
According to its most recent release, Maison Luxe has forged relationships with four individual duty-free sellers, which have already made aggregate purchases in excess of $300,000 in custom luxury timepieces from the company.
In addition, and probably most importantly, the release goes on to note that “these are ongoing distribution relationships.” In other words, this could be another $300K every month going forward. We don’t know.
The company also noted that it is working to expand the scope of these relationships as well as establishing wholesale supplier relationships with additional duty-free sellers.
It should be obvious what the real deal is here: if you’re going to buy a $50k watch, might as well do it somewhere that doesn’t include sales tax. That may be why we are actually such growth in the space.
As noted by the company, according to Statista, in 2018, the global duty-free and travel retail sales market did approximately $76 billion in total sales. That number is expected to grow to more than $125 billion by 2023.
The Value of Money
The other dynamic that was alluded to here is the interesting math in play for Clikia – and presumably for any player in the rare custom luxury goods marketplace: capital opens up market share and reduces cost of goods sold.
In short, give this company more money and you will see it make more money on wider gross margins.
That was implied in its shareholder letter and further reaffirmed in its latest release: “The Company is currently in talks to expand both in terms of volume of timepieces and in product category, to include fine jewelry. Management believes the establishment of additional funding will allow the Company to expand its own inventory and widen margins through volume sourcing, where possible. This will open up access to additional duty-free sellers in ports where the Company has already established relationships and a reputation for credibility, quality, and reliability.”
That should be top of mind for investors in any moves from here by the company to raise capital. More money means more growth potential and greater profitability.
“The idea is to grow a brand that sources retail markets with responsibly sourced and priced watches,” remarked Anil Idnani, CEO of Clikia and Founder of Maison Luxe. “That’s typically nearly impossible to find. This is now more the case than ever due to a supply shock as factories shut down or halt production of luxury goods. However, demand hasn’t dropped at all this year despite the health crisis and resulting economic turbulence. The result is rising prices on inventory we have in-house.”