Shoe Zone Share Discussion Threads

[gargleblaster] 14/1/2015 23:56

IC have done a write up

Profit at Aim-listed Shoe Zone (SHOE) more than doubled last year to £10.5m, while cash generation rose ahead of expectations. This prompted management to announce a maiden dividend of 3.6p.

The footwear specialist enjoyed the best August in its history, helped by strong 'back to school' shoe sales. Men's footwear did particularly well, while sales of handbags rose 73 per cent. Online revenue rose by a quarter to account for 3.1 per cent of total sales - up from 2.2 per cent.

But the real progress came from cost cutting, which boosted margins. The gross margin widened from 59.4 to 61.3 per cent, driven by cost control, more direct sourcing from China and changes to the store portfolio. This last point is a central plank in the group's growth strategy: it constantly renegotiates leases and adjusts the store estate to squeeze out every last drop of profit. Chief executive Anthony Smith told us lease negotiations and store relocations last year turned out better than forecast, reducing the length of lease liabilities and the rental bill. He will continue to focus on making savings through these kinds of self-help initiative in 2015. Meanwhile, capital spending will remain low, at £2.5m.

As over half of Shoe Zone's stock now comes from China, it is also benefiting from the fall in the oil price, which has already substantially lowered its shipping costs. Over the medium term, the lower level of crude could also feed through into raw material costs: 90 per cent of Shoe Zone's products are oil-based. Yet the recent oil-price weakness is not factored into the group's forecasts.

Numis Securities expects adjusted pre-tax profit of £13m in the current financial year, up from £11.4m last year, giving EPS of 20.5p.

SHOE ZONE (SHOE)
ORD PRICE: 234p MARKET VALUE: £117m
TOUCH: 230-238p 12-MONTH HIGH: 242p LOW: 160p
DIVIDEND YIELD: 1.5% PE RATIO: 15
NET ASSET VALUE: 63p NET CASH: £9.1m
Year to 4 Oct Turnover (£m) Pre-tax profit (£m) Earnings per share (p) Dividend per share (p)
2011* 239.1 9.0 10.5 na
2012* 221.1 3.5 5.2 na
2013* 193.9 5.1 6.9 na
2014 172.9 10.5 16.1 3.6
% change -11 +108 +133 -
Ex-div: 12 Feb

Payment: 11 Mar

*Pre-IPO pro-forma figures

IC VIEW:
As we discussed in our tip (Buy, 196p, 11 Sep 2014), Shoe Zone's strategy is focused on profit rather than sales growth, and these results suggest that strategy is on track. The stock has risen 18 per cent since the tip, yet still trades on just 11 times forecast earnings. That looks cheap for a cash-rich, cash-generative retailer, particularly given the promise of generous dividends.

Last IC view: Buy, 215p, 6 January 2015

[davebowler] 14/1/2015 10:03

hxxp://www.insidermedia.com/insider/national/131329-?utm_source=liverpool_newsletter&utm_medium=business_article&;utm_campaign=liverpool_news_tracker

[hatter2] 14/1/2015 09:00

Nice set of results; very happy to continue to hold.

[bruceylegs] 14/1/2015 08:08

Plastic shoes!

[gargleblaster] 14/1/2015 07:56

Nicely in line, with an attractive dividend 3.6p, which will be key to this company going forward. Also positive outlook and improving online sales. I had not appreciated that the falling oil price would benefit them - but clearly it will do.

[funkmasterp12] 14/1/2015 07:33

Lovely stuff. Feels like this should be main market!

[gargleblaster] 06/1/2015 17:49

Article in IC

Value footwear retailer Shoe Zone (SHOE) is set to unveil its first full-year results as a listed company next week. We already know from a pre-close trading statement in October that profit will be in line with analysts' expectations of 17.8p per share, while sales will fall from £193.9m to £172.5m.

But the fall in sales is not cause for alarm. It's part of the group's strategy of focusing on earnings growth rather than revenue growth by constantly rearranging the store estate to squeeze out every penny of profit. Leases are short, averaging three years, with more than 100 leases up for renewal each year, on average. That allows Shoe Zone to capitalise on the fact that rents across most UK high streets have been falling.

The Aim-listed retailer seems to have largely avoided the weather-related problems affecting much of the high street last autumn. September was slow, with a late start to the boot season, but that followed Shoe Zone's best ever August. Chief executive Anthony Smith also said in October that the first two weeks of the new financial year had been good, with the boot season "in full swing". The cash position should also finish the financial year considerably ahead of prior expectations, at £8.5m, compared with forecasts of roughly £6m.

IC view:
Shares in Shoe Zone have risen 10 per cent since we tipped them back in September (Buy, 196p, 11 September 2014). We remain buyers, given the 6 per cent prospective dividend yield and steady profit growth forecast as a result of self-help initiatives. The story remains intact: top-line growth might not be headline-grabbing, but against a weak consumer backdrop a strategy centred on profit growth is sensible. The shares are also very undemandingly rated, on 10 times current-year earnings. Buy.
Last IC view: Buy, 196p, 11 September 2014

[hatter2] 23/10/2014 09:39

Quality company in terms of service, used them myself and impressed.
For those who like PEG it stands at 0.77, PE 10.4, EV to EBITDA of 7.59; plenty of cash on the books and no debt.
I am very impressed with the projected yield at 5.7% and year on year improving ROCE reaching 19.6 at present. Throw in the fact that it’s a family run business, a characteristic I particularly like, and we have a hidden as yet lightly followed stock.
One of my purchasing criteria for stock is a Piotroski score of over 7 this stock has a score of 8.
My view is that this is one to hold for some time and worthy of the patient investor who wants to make a steady capital return whilst collecting an exceptional dividend; DYOR.

Happy holder!

[funkmasterp12] 22/10/2014 12:36

I'm in from today - looks good!

[tudes100] 08/10/2014 11:02

My understanding having read some of the recent coverage is that the major improvements in profitability will be driven by rationalising the store estate and letting unprofitable stores close when expensive leases expire. I'd assume that this is the primary reason why revenue is declining and profitability increasing - seasonality of profitability will probably be uneven until this process has run its course.

[mrx9000] 24/9/2014 21:42

rolo: thanks

[rolo7] 24/9/2014 20:20

mrx9000 kids go/went back to school after summer so need shoes hence a big H2 weighting here!

[mrx9000] 23/9/2014 00:40

In the last statement on 24th June it said that pretax profit rose to £2.7 million for the six month period. It is forecast to make £11.4m so does it make the bulk of its profit in the rest of the year? Sharescope is giving me a forecast for Oct14 of £11.4m - the forecast looks ambitious in my opinion.

[dasv] 22/9/2014 20:41

Apart from the net cash of 9.23m I think it is very encouraging that Free cash flow per share and operating cash flow per share are both greater than EPS.

It's a dowdy brand (but perhaps that's deliberate - like RyanAir's cheapo graphics).

I just bought my four year old twin boys a whole bunch of shoes from Clarks - £36-£40 a pair. I can see how many will want the prices of a supermarket but with much more choice and more sizes available (the downside of buying from Next or Asda or even M&S - they might not have the size and style you want and generally have a restricted range). The recovery in the high street made the BBC 1 o'clock news today.

[nw99] 12/9/2014 18:58

Great news

[gorilla36] 12/9/2014 14:59

Also article in Shares mag.

[stevemarkus] 12/9/2014 10:10

Tipped by the Investors Chronicle.

[nw99] 12/9/2014 08:05

Breaking out on the upside here

[2breakout] 28/8/2014 18:43

An old article, but an interesting read for holders -

[nw99] 27/8/2014 09:57

197p paid !

[nw99] 21/8/2014 07:59

Tipped as a new buy in shs mag today

[nw99] 18/8/2014 12:34

100k sell lapped up buy a buyer nice

[jakes114] 18/8/2014 09:31

Thanks Masureguy, I too am not rushing in to buy and will monitor
Cheers
J

[masurenguy] 17/8/2014 21:32

An interesting comment Jakes114. I like this company and its business model BUT there are a couple of negatives that have inhibited me from investing so far.

1. This was a private family business owned and run by the Smiths who cashed up a 45% stake for £36m at the IPO. None of the IPO cash was reinvested in the business and they still retain a majority 55% stake and run the company. This means they have the leverage to still control and operate the business to their personal advantage which may not coincide with the best interests of the external shareholders.

2. In my experience an IPO is usually undertaken for one of three reasons.
a) Raise money for expansion.
b) Pay down debt.
c) Enable private shareholders to realise their investment by partially or totally cashing out.
I favour a) rather than c) as an investment criterion although having said that I note that Gervais Williams has taken a significant stake here and he is a small cap fund manager whom I respect.

I will continue to watch from the sidelines until I can overcome the two reservations that I have detailed above.