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Shoe Zone’s AGM statement has said FY24E trading is expected to be marginally below previous expectations due to a higher cost environment, including elevated container prices resulting from the ongoing tensions in the Suez Canal, combined with the larger-than-envisaged 10% increase in the national living wage, effective from April. We take a prudent approach to our outlook for H2, with lower gross margin driving a 9.3% downgrade to FY24E adj. EPS. Despite today’s trim to forecasts, Shoe Zone’s valuation remains undemanding, with an FY24E EV/sales of 0.6x, EV/EBITDAR of 3.5x, ex-cash PE of 9.2x and prospective yield of 3.9%.
Shoe Zone PLC
FY23 performance is in line with estimates and reflects solid trading and strong cost control. FY23E revenue +6.1% YOY and Adj. PBT +48% to £16.5m, almost double the £8.5m FY23E Adj. PBT we forecast a year ago following 4 consecutive upgrades over 2023. Net cash of £16.4m is after a total of £26.7m in capex, dividends and share buybacks, demonstrating the strongly cash generative nature of the Group. This is reflected in the announcement of a 6.0p special dividend, taking full year DPS to 17.4p, equating to a 7.7% yield. Trading at just 0.5x EV/Sales, 4.3x EV/EBITDA on an ex-cash PE of 7.9x, Shoe Zone remains a compelling buy.
Shoe Zone has announced FY23 adj. PBT will be no less than £16.0m, +43.3% YOY (FY22: £11.2m) and 18.7% ahead of Zeus’ est. despite previous upgrades in both June and July. Performance has benefitted from strong demand through the key ‘Back to School’ period as well an increase in product margin attributed to lower freight container rates and improved stock management. FY23E and FY24E EPS forecasts upgraded >20.0%. FY24E ex-cash PE of 7.1x, remains a compelling buy.
Strong trading momentum has continued through June and early July, driving a second material upgrade to our forecasts in as many months. Zeus forecast adjusted PBT for FY23E increases by 28.6% to £13.5m, in line with Management’s guidance of “not less than £13.5m”. We continue to think that Shoe Zone’s ex-cash PE of 9.0x FY23 is undemanding for a well-run business with a solid strategy, strong control over cost management, and consistent, high, cash generation.
Strong consumer demand through May and early June, combined with lower container rates has driven a material upgrade to FY23 and FY24 earnings. FY23E Adj. PBT of £10.5m is +23.0% with FY23E EPS +25.0% versus our previous forecasts. Margin improvements are expected to be sustained, with FY24E Adj. EPS +30.0%. An ex-cash PE of 11.9x with a prospective dividend of 3.0% remains an undemanding valuation for a well-run business with a solid strategy, strong control over cost management and consistent, high, cash generation.
Shoe Zone has announced H1 FY23 results, delivering solid revenue growth across stores and online despite the challenging consumer backdrop, with H1 adj. PBT ahead of management expectations.
Robust trading and strong cash generation resulting in a further special dividend distribution, equating to a FY22 yield of 8.2%.
Shoe Zone has confirmed a fifth consecutive earnings upgrade, with FY22E adj. PBT to be at least £11.0m, 4.5% ahead of Zeus estimate. FY22 net cash of £24.4m is +£9.8m YOY, after £10.3m outflow on capex, debt repayment and dividends paid in the year, reflecting the incredibly cash generative nature of SHOE’s model. Our FY22E dividend increases 18.2% to 8.0p equating to a yield of 4.4%. We upgrade FY23E Adj. PBT +20% to £8.5m, building on FY22E positive performance with further shareholder distributions through share buybacks and special dividends likely through FY23. SHOE is the standout performer in UK consumer stocks and remains a highly compelling investment proposition at current levels, with conservative forecasts and on an undemanding rating.
Our recent site visit has reaffirmed our conviction that SHOE is one of the most resilient and attractive consumer stocks on the market.
Strong trading through August, driven by demand for summer products and a promising start to key ‘back to school’ trading, combined with ongoing margin improvement means Shoe Zone now expects adj. PBT to be “not less than £10.5m”, 11.0% ahead of previous guidance of “no less than £9.5m”.
Better than expected demand and further strong margin performance leads to an upgrade in FY22E adjusted PBT from “no less than £8.5m” to “no less than £9.5m”. Zeus revenue forecasts increase by £1.5m (1.0%) to £157.4m and adjusted PBT forecasts (adjusted to exclude profit on the sale of freehold property and foreign exchange revaluations) increase by 12.0% to £9.5m.
Moderating freight costs, rental cost savings and selective price increases have driven a 30% upgrade to our FY22E adjusted PBT forecast.
H1 results confirm a strong recovery in store sales and a bounce back in profitability, benefitting from 26 weeks of uninterrupted trading. The Group is now debt free and has reinstated its dividend, with an interim distribution of 2.5p declared and scope for further special dividends and share buybacks.
FY21A Results were well flagged in November’s trading update. Today’s announcement reveals the Group is now debt free and reiterates its intention to return to the dividend list in the current period. Shoe Zone has a clear and well-defined plan to transform its store portfolio and grow its digital offer through its shoehub platform, which we believe will deliver a well-balanced retail model that can win market share and drive profitable growth.
Shoe Zone is upgrading FY21E Adjusted PBT expectations to £8.0m, a 22.7% upgrade to our previously published forecast of £6.5m, following initial work done as part of the ongoing yearend review process. The benefit of this upgrade also flows through to FY23E where we increase our forecasts by the same quantum. Despite the recent share price rally, we continue to believe Shoe Zone trades at a deep discount to its fair value, with a return to the dividend list anticipated in the current financial year.
Shoe Zone PLC Shoe Zone PLC
Shoe Zone’s accelerated digital strategy and defined store rationalisation programme, alongside decisive action on cost control and cash preservation, means the Group is emerging from the pandemic as a leaner, stronger and more resilient business. Robust cash generation means we expect the Group to be debt free and able to reinstate its dividend in the current year.
The group has reported interim results for the six months to 3 April 2021 which reflect the fact that the estate was closed for a minimum of 16 weeks in the period due to COVID-19. The stores are now open and trading although at this early stage of reopening, our forecasts remain under review.
The group’s final results reflect the impact of COVID-19, which continues to affect the group’s trading profile. As a result, our forecasts remain under review.
Shoe Zone (SHOE): Corp | Trackwise Designs (TWD): Corp
Shoe Zone PLC Trackwise Designs Plc
Shoe Zone (SHOE): Corp A setback but still a winning proposition
Against the backdrop of UK retail sector turmoil and material profit warnings, SHOE stands out as one of the very few retailers continuing to deliver upgrades in highly challenging markets. We upgraded forecasts on trading strength in October and do so again today (FY19 PBT increased by +8% to a conservatively framed £11m) on the back of very strong FY18 results, with positive trading momentum continuing so far into FY19. Alongside better-than-expected FY18 results, management has also delivered a step-change in confidence/clarity around SHOE’s strategic growth ambition. This is a significant moment for the SHOE investment case, with SHOE entering into a distinctive new phase of growth which, in turn, should have important positive long-term implications for sentiment, forecasts and valuation. TP raised to 230p to reflect the opportunity and eye-catching c11% total (incl. special) yield.
Today’s strong FY18 pre-close trading update represents a positive profit surprise. We therefore increase our FY18 PBT forecast by +9% to £11m. The roll out of Big Box and strong progress in online sales underpin the medium-term growth profile, backed by SHOE’s strong balance sheet. Cash conversion remained strong, with net cash at £15.7m at the year-end, with SHOE therefore anticipating to announce an 8.0p special dividend (although we do not explicitly forecast it at this stage), or £4m of excess cash. SHOE’s operational and financial performance in FY18 is even more noteworthy given the raft of profit warnings reported elsewhere in the UK clothing/footwear sector over the past two months. It is difficult for any retailer to stand apart from the turbulence affecting the sector at present, but the combination of SHOE’s strong performance, low valuation and appealing dividend yield (6.9% on the ordinary) make it look a particularly attractive investment, in our view.
President Energy (PPC): Corp Activity ramping into 2019 | Shoe Zone (SHOE): Corp Pre-close = Profit surprise, strong cash generation + special
Shoe Zone PLC Molecular Energies PLC
The well-attended finnCap-organised investor site visit, hosted by CEO Nick Davis and CFO Jonathan Fearn, to SHOE’s head office in Leicester yesterday provided useful insights into SHOE’s unrelenting focus on operational excellence as a defining feature of its corporate culture and one of its key drivers of profit growth. We came away with the sense that SHOE has (1) successfully navigated the key-for-profits summer and Back-to-School period and is therefore well-placed to meet FY18 (y/e September 2018) consensus expectations, and (2) operationally, the proven business infrastructure is well-prepared to support many years of solid revenue growth (likely low- to mid- single digit percentage) as the measured acceleration in SHOE’s two medium-term strategic growth initiatives (i.e. the roll-out of the Big Box store format and profitable expansion of its online business) becomes increasingly meaningful in the overall revenue mix. We therefore reiterate our TP of 210p.
Against a turbulent retail sector backdrop, SHOE has delivered very encouraging H1FY18 results, demonstrating that management continues to make strong strategic, financial and operational progress. This reinforces the equity story, the key underappreciated elements of which we revisit here. TP increased to 210p.
Shoe Zone is well supported by a running dividend yield of over 5.5%, which, as a result of strong cash conversion, should be topped up by frequent special dividends. The early success of the new Big Box format hints at a new source of growth to accompany the early-stage online business, the international potential of which will be explored this year.
Lower-than-expected FY16 numbers have reset the base and we remain cautious on the outlook. We downgrade our FY17E and FY18E profit forecasts by 11% and 16% respectively and our price target from 223p to 190p.
Shoe Zone (SHOE.L) | Beximco Pharmaceuticals (BXP.L) | Valirx (VAL.L) | Galileo Resources (GLR.L) | Alba Mineral Resources (ALBA.L) | Tekcapital (TEK.L) | Swallowfield (SWL.L) | Clinigen Group (CLIN.L) | 88 Energy (88E.L) | Share (SHRE.L)
SHOE BXP GLR TEK BAR CLIN 88E ALBA VAL 300857
H1’16 numbers were a tale of two quarters. H2 is trading in line with expectations and has a soft base. We retain our FY16 earnings forecasts and 223p price target but move from a BUY to a HOLD rating given the share price appreciation.
While FY 2015 results were exactly in line with our expectations, weak Q1 2016 trading leads us to trim our FY 2016 EPS forecast by 5% from 18.2p to 17.4p (+7% growth YoY). Our price target moves from 236p to 223p (+16% upside to current price) and values the equity on 12.8x FY 2016 earnings. We retain our Buy recommendation given the potential for higher capital return on a sustained basis, a key pillar of our investment case.
Connect: Investment in growth delivering (BUY) | Shoe Zone: Yielding results (BUY) | Wentworth Resources: Operational update (BUY) | Xaar: Positive trading update (HOLD) | Independent Oil & Gas*: Skipper and funding update (CORP)
SHOE XAR SNWS WEN IO7
We initiate coverage with a target price of 236p (+32% upside, 12.9x our 2016E EPS) and a Buy recommendation. We think the sell-off post profit warning was overdone, although we appreciate that the valuation was frothy and trust needs to be regained. However, we think forward PE multiples (9.8x and 9.0x) undervalue the achievable 7% EPS CAGR, 6% prospective yield and potential for further capital return to shareholders. Management lock-ins expire shortly, potentially increasing liquidity in the stock.
Shoe Zone: Initiation of coverage (BUY) | Independent Oil & Gas*: Fundraising (CORP) | Transense Technologies*: Sale of intelliSAW (CORP) | Sound Oil: MoU signed with Schlumberger (BUY) | 4imprint: Strong organic growth continues (BUY)
SHOE SOU FOUR TRT IO7
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