GPO Plus, Inc. (OTCQB: GPOX) is an example of a well-run, fast-growing company staying under investors' radar. And like the others, it presents a compelling investment opportunity. In fact, they, themselves, provide plenty of evidence supporting that thesis. Revenues in FYQ4 were 320% higher than in Q3; they operate over 570 stores, and get this, they expect to open an additional 500 locations during its current fiscal year. All tolled would facilitate revenues from over 1000 store locations and, notably from a revenue multiples perspective, put GPOX on a fiscal year run rate to exceed $7 million in income. And that's using only the low end of its forecast.
GPO Plus recently noted that its stores generate $580 monthly on the low side and upwards of $2,120 for its top performers. Extrapolating that income and assuming an average of just $1,000 per location with 1000 stores in business, revenues are more likely to eclipse $12 million. Again, that total plays just the middle. Based on sales traction, GPOX looks better able to score revenues well over $15 million from the entire year of 1000 store performance. And that's assuming that GPOX stops there. Spoiler alert: they don't plan to.
Response to its recently rolled out "White Glove" service is so strong that the momentum behind its expected store build could be substantially higher. Those wondering how GPOX can manage that growth pace must understand its business model.
Facilitating Extraordinary Growth
In simplest terms, GPOX creates stores within a store. That model allows for seamless integration into existing retail locations. More importantly, from a development and maintenance perspective, it does virtually all the work to set up and maintain the shelf space. It's a model retailers are embracing. And why wouldn't they.
They are provided a cash cow free of charge, needing to only sign a receipt and pay their products invoice. They need not worry about POS material, inventory maintenance, or delivery schedules. That's all handled by the GPOX team through "hubs," either regional or mini, that provide "White Glove" Direct-to-store (DSD) distribution and service. That commitment and ability to serve is the value driver. And with store count and revenues expected to surge in its new year, at roughly $0.18 a share last week, GPOX presents a value proposition too good to ignore.
But more than service is attracting new clients. Its products are also excellent, including those within its flagship brand portfolio for "The Feel Good Shop+" and "Mr. Vapor. Those two brands have been the growth engine, providing the most significant revenue lift. The better news, and the reason for the surge in store growth, is the win-win proposition GPOX provides.
Retail store owners win by enjoying a consistent revenue stream without needing to manage the GPOX products shelf. GPOX wins by scoring revenues that can fall quickly toward its bottom line by implementing and managing its new DSD service program through "Mini Hubs," supported by a Regional Distribution Hub currently operating in Lubbock, Texas. GPOX's target market includes convenience stores, gas stations, vape shops, and liquor stores.
That puts tens of thousands of potential locations into play, which can be opened and served faster than many think by leveraging its "hub" style management approach for service.
Targeting A Massive Retail Market Opportunity
Brett H. Pojunis, CEO of GPOX, is certainly optimistic about its near-term potential, saying, "We are incredibly pleased with the results and feedback from our retail partners. Our strategy to provide a best-in-class, state-of-the-art, technology-driven approach to direct store delivery ("DSD") has proven there's an extraordinary opportunity to capture additional market share." Supporting that intent, he notes that convenience stores typically obtain 80% to 85% of their merchandise from a few primary distributors, then chase multiple sources for the remaining lifestyle goods ranging from nutraceuticals to sunglasses. Focusing on the 10% to 15% of inventory typically sourced from multiple distributors and vendors, the GPOX mission and opportunity is to become the premier provider of its white-glove DSD service model, whereby its drivers and service managers go above and beyond, ensuring shelves are stocked and inventory is replenished. That leaves the store manager with little to do except sign a confirmation of receipt and accrue the revenues.
The company's plan is working. Mr. Pojunis said, "The success of our new service program has already prompted our retail customers to request additional product offerings. We are capitalizing on this demand by allocating all resources needed to roll out to 319 retail stores quickly and efficiently. With the introduction of our Mini Hubs, GPOX also has the opportunity to add other specialty retailers in that region as well as recruit outside sales reps and Independent Sales organizations (ISO's). Furthermore, GPOX receives valuable point-of-sale data, allowing us to optimize our product mix and introduce higher margin "white label products" such as our Yuengling Ice Cream Gummy line, increasing both top-line revenues as well as unit economics. Truly exciting times for our team members, retail partners and shareholders."
With the plan engaging new business, the already robust revenue growth curve could steepen further. As previously noted, GPOX is seeing a lift in monthly sales per location activated from $580 to over $2,120. The FYQ4 revenues, unaudited, are reported to be over $430,000 compared to just over $102,000 in the prior quarter. Audited official revenue numbers will be published in the Company's 10K filings. While revenue growth is impressive, investors should expect more.
Remember, GPOX services approximately 570 stores across 12 states centralized in the Southwest and Midwest regions of the United States. That's what drove prior revenues. Moving forward, GPOX announced 316 locations approved for the new program, with approximately 100 currently active. An additional 116 stores in Dallas and Austin, Texas, and Albuquerque, New Mexico, will be activated before the end of August 2023.
After that, GPOX said it had identified an additional 103 stores in Wyoming, Kansas, and Missouri to be activated by the end of October 2023. It's a lot to manage. But GPOX can do so through a Mini Hub, with sales teams actively looking to add additional specialty retailers (gas stations, smoke shops, vape shops, and liquor stores), with a goal of each Mini Hub servicing 100 to 150 locations. This equates to an initial plan of 1,000 to 1,500 retail locations opened, supported by the Regional Hub in Lubbock, Texas.
Value Drivers Are In Real-Time
While that growth pace is impressive for any sized company, it's especially so when considering GPOX is meeting its objectives while still being classified as a nanocap. That exposes an opportunity, not a deterrent. Moreover, products aren't the only value drivers. GPOX is accruing further value through partnerships, licenses, expanding distribution networks, and a product portfolio arsenal able to generate substantial revenues at excellent gross margins. Factoring in a legitimate sector multiple, GPOX could justify an exponential run higher.
Again, this is not an overzealous presumption. Remember, GPOX's Direct to Store ("DSD") business and service model benefits the retail client partner, driving revenues for clients by providing an opportunity to have a fully-managed "store within a store" whose risk-free returns offer a revenue-generating proposition that may be too good to ignore. Many retailers aren't.
With over 1000 new stores expected to open this year, it's evident that many are already taking advantage of what GPOX can offer. Still, while planned 2023 openings contribute to GPOX's growth pace shifting into its highest gear, it represents just a tiny fraction of the expansion opportunities in play. GPOX's "White Glove" service could provide the fuel to surge well beyond that mark. Reasons support that presumption.
Leveraging Its White Glove Service Program
Foremost is that with its white-glove DSD service model, GPOX takes on the responsibility of ensuring shelves are stocked and inventory is replenished, relieving the retailer of that burden. The only role of the location manager is to sign a receipt for the order. Retailers embrace that setup, a welcomed change from vendors at stores like Walgreens (NYSE: WBA), CVS Health (NYSE: CVS), and Rite Aid (NYSE: RAD) dropping off pallets that employees have to deal with. That's not the case when partnering with GPOX.
Once implemented, retailers and their employees quickly enjoy the benefits of additional revenues without much effort. And those rewards can be significant, with GPOX noting a lift in monthly sales per location activated from $580 to over $2,120. Currently, GPOX services approximately 570 stores across 12 states centralized in the Southwest and Midwest regions of the United States. Once its market hits the 100 count, the "Mini Hub" model takes over.
Typically consisting of a 1,000 to 2,500 square feet facility and 1 to 3 drivers, these Mini Hubs are set up once its anchor retail partners reach a number that makes opening one economically feasible. These deliver high touch, "white glove" DSD ("Direct to Store Delivery) service, ensuring excellence on all fronts. As important, they directly support the "Region Hub" strategy, with the "Mini Hubs" located outside the 150-mile radius. When launched, a Mini Hub is assigned to GPOX's retail partners in the immediate area, typically involving 35 to 45 initial locations. Implementing this approach with two new Mini Hubs has resulted in over a threefold increase in sales and growth.
Another consideration is that specific geographies can sponsor multiple Hubs. In fact, plans are to launch 5 to 7 additional Mini Hubs by December 2023 to reach its target of over 1,000 retail customer locations within the Dallas and Austin, Texas; Albuquerque, New Mexico; and Wyoming/South Dakota areas. Remember, each new location is an immediate revenue generator. Fast, too, since it takes little time for each presence to become profitable. That advantage and action could ignite a deserved rally for GPOX's stock, an assumption supported by the high multiples given to food and retail convenience companies. For instance, Performance Group (NYSE: PFGC) trades with a 29.09 P/E ratio. Other companies follow suit: Sysco (NYSE: SYY) sports a 24.50 P/E ratio, U.S. Food (NYSE: USFD) an impressive 31.24 P/E, and Unilever (NYSE: UL), while lower than the others, has a 15.78 P/E. (* P/E rations on 7/24/23, 09:31 AM EST)
By the way, store openings aren't the only value drivers.
Increasing Contributions New Assets, Distro+ and Feel Good Shop+
While stores generate revenues, there's more to the GPOX story to add to an appraisal. Last year, GPOX announced the formation of DISTRO+, an operational division aiming to drive increased retail distribution. GPOX announced its Phase One initiative focused on adding products and retail partners. That phase proved successful, evidenced by DISTRO+ entering into distribution agreements with brands, signing up retailers, and identifying distributors they expect are ripe for acquisition. Those weren't the only milestones reached.
GPOX additionally secured a license agreement to create Yuengling's Ice Cream flavored recreational hemp products. Yuengling is a prevalent household name in the northeast and is currently enjoying national expansion, boosting distribution into potentially thousands of retail locations. GPOX also scored a master distributor agreement with Tech Armor, selling screen protectors and mobile device accessories, which they plan on rolling out to retailers soon. There's more. A Master Services Agreement was established with SurgePays, providing SurgePays fintech products and services to GPOX retail partners while facilitating the distribution of GPOX products through the SurgePays marketplace. SurgePays offerings will also enable GPOX to generate additional monthly revenue per store. There's more value to appreciate.
GPOX secured yet another master distributor agreement with Hempacco, which sells hemp cigarettes, smoking paper, and alternatives to nicotine tobacco products. Hempacco's products include Hemp Hop, a partnership with hip-hop icon Rick Ross, Rap Snacks founder and CEO James Lindsay, and Cheech and Chong licensed products. Additional influencer-driven products are expected soon.
On the acquisition front, GPOX purchased Nutriumph, a leading seller of nutraceutical and vitamin supplements, including their banner product, Herberall®. That fits nicely into another GPOX value driver, GPOX's "The Feel Good Shop+," a "store within a store" concept offering an extensive range of CBD and other hemp-derived cannabinoid products. The Feel Good Shop+ provides consumers a comprehensive range of hemp-derived cannabinoid products, including Delta-8, HHC, and other leading products from trusted companies like Hempacco, Kill Cliff, Canopy Growth, and CaliGold's Flavorz. Consumers will be able to find all of their favorite products in one place, and in a segment that already presents a multi-billion rev-gen opportunity, these placements could contribute significantly to GPOX's 2023 initiatives.
A Sum Of Its Parts Appraisal Equals Bullish Expectations
Factoring all these massive deals, assets, expansions, and inherent technologies, GPOX stock priced at $0.18 exposes more than a significant investment opportunity; it's a ground-floor one. Those needing more proof of a valuation disconnect between price and performance only need to look at revenues. These are real revenues, not a typical nanocap whose proforma ambitions are the headline.
GPOX scored an over 320% increase in its revenues on a consecutive quarterly basis. While they didn't provide formal guidance, the commentary suggests that with its store opening accumulating and contributing, an expectation to post at least $7 million in FY2024 is in its crosshairs. As factored above, even that lofty increase could be conservative by accounting for every new location to hit the low end of current sales run rates. Many will score better monthly totals.
Thus, it's difficult to justify GPOX's stock price as fairly valued. Factoring in the sum of its parts and a tightly held share float, the case for higher prices is a strong one. And it's getting stronger with each new store opening, supporting that the current window of opportunity may close faster than many think, resulting from this currently under-the-radar company getting on investors' screens.
The bottom line: As generally happens, at some point, fundamentals will steer a stock's direction. Those that have solid ones rise; those that don't fall. It's usually that basic when it comes to valuing growth companies. Thus, applying that precedent and knowing that GPOX is better positioned than ever for near-term growth, the following bullish assessment is supported: the path of least resistance for GPOX stock is higher, and more likely than not, appreciably.
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