Studio, Findel’s main customer-facing business, has delivered steady sales growth of c 3% in the 16 weeks to 19 July, against a tough prior year comparative and in line with company expectations. Education also continues to make good progress, albeit in the early part of the key ‘back to school’ season, with customers increasingly ordering online. We leave our assumptions and forecast two-year EPS CAGR of 7.3% unchanged, ahead of Studio’s peak trading period. We value the shares at 423p, a significant premium to the current share price.
In the 16 weeks to 19 July, Studio’s sales increased by c 3%, against a tough prior year comparative of 11%, which was distorted, in part, by the timing of Easter and extreme weather conditions pushing sales into the start of the prior year. Ahead of peak trading, the roll out of initiatives including the Studio app and cash at point of sale payment options remain on track.
Education has also traded well in the early part of the key ‘back to school’ season, with customers increasingly ordering online and using digital tools to save time and money. Online now represents around two-thirds of Education sales compared with 20% two years ago.
Findel trades on a low FY20e P/E of 8.1x, which appears unjustified for a predominantly online retailer with a strong balance sheet and significant growth opportunities. Our blended DCF and peer valuation remains unchanged at 423p. The proposed change of company name from Findel to Studio Retail Group will be tabled at today’s AGM.