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16/1/2020
18:53 | edmundshaw: Director change is not news (for most of us).So it should not logically imact the share price... but then Mr. Market is not terribl logical...
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10/1/2020
21:46 | edmundshaw: Underlying the PE is about 10. But with several positive trends (growing and profitable online, reducing rents, Big Box stores clearly going well and the new hybrid format looking exciting too), I find this an easy share to hold at this price. Yield looks sustainable at 11.5p (circa 7%) and in years with special dividends (two out of the last four at 8p) this approaches 12%.
I am cautiously pencilling in a 4p special dividend for next year and improved earnings as a likely median earnings scenario - which would obviously likely be accompanied by an improved share price. But if some of those good metrics add underlying growth to a less difficult year, of course things could get considerably better.
I didn't comment earlier in case the price dropped further. I would have liked a little top-up!
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31/1/2019
17:13 | winnings1: The Company's excellent performance is behind the rise in the share price, and a good bit more to go, the fundamentals point to fair value at around 280p.
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11/1/2018
14:01 | masurenguy: Paul Scott has posted a very favourable view of the Shoe Zone results.
Shoe Zone (LON:SHOE)
Share price: 160p (down 1.2% at market close)
No. shares: 50.0m
Market cap: £80.0m
Revenue fell 1.3% to £157.8m. This fall reflects net store closures. Unfortunately, the company doesn't seem to disclose its LFL sales performance, which is a pity. Loss making stores now make up only 6% of the Shoe Zone portfolio, having been 11% three years ago. Overall store numbers reduced by a net 14 branches to 496 at the year-end (2016: 25 branches closed leaving a total of 510). The flexible store portfolio, and short leases, is a key strength of this business. Also, the low capex required to fit-out a shoe shop is another advantage. Therefore SHOE doesn't get lumbered with problem, loss-making shops - it can exit from them very easily - a big advantage. The company should therefore be a beneficiary of falling High Street rents in many towns, in a way that many other retailers will not benefit (due to them having longer leases, with upward-only rent reviews). Short leases are absolutely critical at the moment, for retailers to maintain their profitability. It is targeting 20 new stores in 2018 - 10 of which are the new "Big box" warehouse format.
Gross margin is very strong, at 63.2% (up from 62.0% last year). This compares favourably with most fashion retailers, which tend to achieve a gross margin of around 55%. This is achieved by direct sourcing product from China, and I imagine that stock loss (i.e. theft by customers & staff) would be lower for footwear than for clothing. I'm very impressed that the amount of stock sold at markdown prices is only 7.6%. This figure is not normally disclosed by retailers, but in the fashion world it is generally much higher than this. So ShoeZone is clearly pricing its product competitively, with customers happy to buy at full price.
Profit before tax fell 8% to £9.5m. The company says this is primarily due to the adverse impact of foreign exchange on imported goods into the UK. That doesn't make sense to me. I would have expected higher cost of imported goods to flow through into a lower gross margin. In this case gross margin is higher, but it seems that some product cost has gone through administration expenses, which sounds peculiar to me. Maybe the gross margin actually fell, if forex losses had been put through cost of sales?
EPS fell by 6.5% to 15.8p. This gives a PER of 10.1, which seems about right to me. It's cheap, but that's because earnings have fallen.
Dividends - a final divi of 6.8p is flat against last year. The interim divi was 3.4p (paid in Aug 2017), giving total divis of 10.2p, a attractive yield of 6.4%. The divi income is the main reason for holding this share. Note that shareholders were also paid special divis of 6p in Mar 2016, and 8p in Mar 2017. It sounds like there won't be a special divi in 2018. The board remains committed to delivering positive dividend growth to shareholders. In recent years, the strategy has been to pay out around 60% of post-tax earnings as a normal dividend and any surplus cash above £11m as a special dividend. For the year ended 30 September 2017, the board is proposing to pay out 65% of post-tax earnings as a normal dividend. The £0.8m surplus cash over and above the £11m that is required for the business to operate effectively will be reinvested in the business. This results in a final dividend of 6.8p per share (2016: 6.8p), giving a total dividend for the year of 10.2p (2016: 10.1p) per share.
This is a model of clarity, so well done to the company on that. It is managing investor expectations very well, and generally I find its accounts & narrative crystal clear. Excellent stuff - if only all companies could do things this way! Mind you, ShoeZone is a simple, and cash generative business, so they have nothing to hide.
ecommerce - revenue rose a creditable 34%, and this contributed £2m towards profits in 2017 (before central overheads). So this is becoming significant to profits, although it's only 5.3% of total revenues, at £8.3m. I would like to see this growing faster, which might then drive a future re-rating in the share price, perhaps?
Outlook
Sounds alright. Shoe Zone has made a solid start to the year and trading is in line with expectations. We are making good progress against our strategic objectives and the board remains positive about the outlook for the Group for the remainder of the year. This is despite mentioning "challenging" & "difficult" economic conditions. Although being at the value end of the market, SHOE should prove more resilient than others, if consumer spending does fall.
Balance sheet - is strong.. NTAV is £31.2m - very healthy for the size of company.
Working capital - looks good, with a current ratio of a healthy 1.67 (for retailers, which don't have much in the way of debtors, anything over about 1.0 is normally fine). Net cash is £11.8m
Pension deficit has come down sharply, from £13.1m to £7.1m, reflecting higher bond yields. It might well be worth looking at companies with pension deficits now, as the trend should now be downwards, due to interest rates starting to move up.
Cashflow is excellent, with £13.9m cash generated from operations, flat against last year. Capex rose by 61% to £5.1m, reflecting the cost of new stores. The big box stores must cost a lot more to fit out than regular stores. Dividends of £9.1m were paid out, which was not covered fully by cash generated (after capex), so the cash balance fell from £15.0m to £11.8m. Not a concern, but worth noting.
My opinion - as you've probably gathered from the above, I like this company. The figures are simple, and easy to understand. It is decently cash generative, and above all has a very flexible store portfolio with short leases. So it can adapt to market conditions and has only a short tail of loss-making shops. We're in a bull market, where people are chasing growth companies. So this has left behind a lot of value shares like this. Therefore there might only be very limited upside on the share price? So this share is more of interest to long-term shareholders, seeking a reliable high dividend stream. The divi yield here is excellent, at 6.4%, and that looks sustainable to me - due to being reasonably well covered by earnings, and the company having a strong balance sheet with net cash. Plus shareholders get special divis every now & then (but don't expect anything in 2018).
Overall then, for income seekers, I think this share could be an attractive option. As always that's subject to you doing your own due diligence on the share. I'm not recommending anything here, just giving my personal opinions - which are sometimes right, and sometimes wrong. Stockopedia also looks favourably on this share, with a decent StockRank (80). I always like to sense-check my own research & view, by having a look at the StockRank - it's an excellent way to make sure I haven't got the wrong end of the stick. I visualise the StockRank as having a Warren Buffett type figure leaning over my shoulder, pointing at the screen saying, "Be careful here, have you thought about xyz, etc"!
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25/10/2017
16:19 | masurenguy: Paul Scotts view on the interims.
"SHOE has a good balance sheet. Net cash is reported as being £11.8m on 30 Sep 2017. Its "big box" stores are performing well, with more planned.
My opinion - I like the business model of this show retailer. In particular, it usually only rents shops on short leases. With low fit-out costs, this gives it great flexibility - shops which don't trade profitably can be jettisoned quickly & easily. Whereas onerous lease liabilities are usually what kills many retailers. That isn't a risk here. The valuation metrics, in particular PER and dividend yield, look very good. Also, the quality scores are surprisingly high. I suppose the question is, how will consumer demand for cheap shoes hold up? As a boring, high yielding share, I'd say this one looks worthy of consideration, for an income portfolio. It looks good value to me, but I'm not sure that there's much upside potential on the share price."
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23/2/2017
09:04 | fenners66: WTF is happening with the share price? Up on a magazine tip but crashing down again today, results out? Cant see em.
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04/2/2017
11:02 | masurenguy: Shoe Zone (AIM:SHOE)
There may be currency pressure on the cost of shoes from suppliers but this well-managed shoe retailer has delivered consistent performance over a number of years. Senior management are well-aligned as major shareholders and clearly like their dividends! Year-end net cash of £15.0m resulted in the business propose the payment of 2 dividends: a final dividend of 6.8p per share was up 4.6% on the prior year’s 6.5p, resulting in a total dividend for the year of 10.1p per share. There was also a special dividend of 8.0p per share up 33% on the prior years’ 6.0p. This brought total dividend for the year to 18.1p, an increase of 15.3% over the previous year and a yield of nearly 10% at the current share price (183p).
https://www.share.com/blog/2017/february/6-dividend-growth-champions/
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14/1/2017
00:07 | masurenguy: An interesting and positive review of the results from Paul Scott a few days ago.
Shoe Zone (LON:SHOE)
Share price: 182.5p (unchanged today)
No. shares: 50.0m
Market cap: £91.3m
(at the time of writing, I hold a long position in this share)
Results 52 wks ended 1 Oct 2016 - the figures for this discount shoe retailer were pre-announced in a trading update, which I reported on here, on 25 Oct 2016.
So this looks OK. A bit more detail:
•Gross margin - excellent, at 62.0% (LY 61.5%) - can this be maintained though, as forex cost pressures mount? In narrative, company reassures that GM can "broadly" be maintained.
•Online sales up 11% (should be more). I can't find a figure for total, or what proportion of grand total, so assume it's not particularly high.
•Growth in international sales online - encouraging, but need figures on this to assess important.
•Short leases - this is a key competitive advantage, which I like very much. Average length is only 2.6 years. This means company has flexibility to relocate, and take advantage of "trend of falling rents".
•Business rates - company says it will be a net beneficiary from the recent revaluation - good news.
•Balance sheet - very solid, with plenty of cash. Although note pension deficit has risen significantly and £0.6m annual cost is going to rise.
•Family-controlled, so a takeover bid is very unlikely, unless they want to sell out. If they do, then it would have to be at a decent premium.
•Dividends - very generous - 6.8p final, plus 8.0p special divis are in the pipeline.
•Cash generation - very good, and anything above £11m is paid out to shareholders, a terrific discipline.
•Current trading - in line with expectations. They're up against soft comps though, as last year's H1 was poor.
My opinion - I like it a lot. However, it's a mature business, so where's the growth going to come from? In current market conditions, I doubt there is much upside on this share price - the market isn't interested in mature retailing businesses right now - it wants fast growing ones. That said, the income from divis here is smashing. I've dipped my toe in, with a small purchase this morning. My intention is to research it in more depth, and think about it more, before deciding whether to buy any more. I doubt this will become a significant holding for me, it's more a dabble, and to generate a bit of dividend income.
Based on the bullet points above, I think Shoe Zone should be able to cope with more depressed retail conditions in 2017 far better than many others. That's mainly due to its variable (and reducing) costs on shop leases, and an apparent ability to maintain margins. I like that it's a really entrepreneurial business, run by a family who clearly know what they're doing, and are experienced. That said, I don't see much excitement being likely with this share, and it could even drift down, in current market conditions. I would buy more if it dropped significantly.
EDIT: I forgot to mention, FinnCap has put out a rather downbeat note today, saying it's going to reduce its forecasts. Another broker has put out forecasts which show negligible profit growth over the next 2 years. Therefore I think we should work on the basis that profit is likely to be flat, or maybe down a little in the short to medium term. I think they're perhaps being a little too negative. Sure, SHOE is subject to the same wage cost pressures as everyone else. However, it has mitigated cost increases from the forex issue, so it says, and is also able to manage down its rent+rates costs, unlike most other retailers. So to my mind, this company is more likely to weather any storm in weaker consumer confidence, than most other retailers.
http://www.stockopedia.com/content/small-cap-value-report-11-jan-2017-part-1-shoe-joul-166152/
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10/3/2016
13:38 | imranawan: No problems Masurenguy and I appreciate your kind words.
I agree that the move to a larger Grade 1 stores is a real positive for SHOE and should help them grow the top line. I'm just wary of the retail space in general, and think the outlook statement gave them some wiggle room should they not hit forecasts. Part of me selling out was also based on what may happen to the share price should they miss forecasts. Last year they fell from a peak of 260p to 185pn on the day of the PW and then back to their IPO price of 160p.
If they miss forecasts for this year, the market will punish them. Recent IPOs that have disappointed such as ENTU and LAKE have been punished heavily by the market. I had quite a decent chunk of my folio in SHOE, so wanted to reduce risk.
I agree with your points that the current valuation is not demanding and is supported by a nice yield. SHOE is on my w/list and I will buy back in at some point.
I don't have any immediate plans for deploying the cash, as I'm trying to build up my cash levels, given the jittery markets and Brexit looming on the horizon.
Good luck to you and other holders.
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22/4/2015
08:09 | masurenguy: Mixed press reviews on yesterday's trading update !
Shoe Zone tripped by ankle boot profit warning
The discount retailer has sounded a profit alert less than a year after its float
http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/11553599/Shoe-Zone-tripped-by-ankle-boot-profit-warning.html
Shoe Zone profits stumble after warm winter
The share price had surged to 258p before today’s stumble, which sent it plunging by 73.5p to 184.5p. Matthew Taylor, an analyst at Shoe Zone’s house broker, Numis, cut his profit forecast for the 12 months to September by 20% to £10m, with the following year’s figure reduced by 15% to £12m.
http://www.thetimes.co.uk/tto/business/industries/retailing/article4418099.ece
Shoe Zone profits hurt by ankle boots
Company sounds profit warning and cuts dividend after unseasonal weather prompts shoppers to buy cheaper ankle boots over dearer knee-high variety
http://www.theguardian.com/business/2015/apr/21/shoe-zone-profits-hurt-by-ankle-boots
Is Shoe Zone PLC A Contrarian Buy After 25%+ Fall?
I believe Shoe Zone could be a profitable contrarian buy: if this year’s profit miss turns out not to be as bad as expected, the shares could rise sharply. On the other hand, the old stock market adage that profit warnings come in threes is very often true, as management only gradually admit the scale of the problems they face.
http://www.fool.co.uk/investing/2015/04/21/is-shoe-zone-plc-a-contrarian-buy-after-25-fall/
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PLUS1
