Shoe Zone Share Discussion Threads

[someuwin] 15/9/2022 11:18

Zeus note out Today...


Shoe Zone plc
SHOE LN – General Retail

Strides ahead Our recent site visit has reaffirmed our conviction that SHOE is one of the most resilient and attractive consumer stocks on the market.

* Resilient market position: As a leading value footwear retailer, we believe SHOE is well positioned to capture share as consumers seek affordable alternatives in response to ongoing inflationary pressures. Several high street competitors have exited the market (Arcadia Group, Debenhams) with Tesco recently withdrawing part of its footwear offer further strengthening the Group’s market position.

* Property transformation will drive productivity: SHOE is in the process of migrating its store estate from its legacy network of small high street stores into new, larger-format stores including ‘Hybrid’ stores located in town centres but offering c.2.0x the space of a typical legacy store, and out of town ‘Big Box’ stores located on retail parks (2.5x larger). Store transformation should improve productivity and drive contribution margin accretion. The Group’s Leicester head office and warehouse is also well invested, and we believe capable of supporting revenues of up to £250m with minimal additional investment required.

* Low product risk, robust supply chain: The Group’s core Shoe Zone product range of 300 styles across men’s, women’s, and children’s is focused on timeless styles in popular colourways, with ranges ordered in high volume (typically 15,000 pairs per style) and able to be carried over from season to season. Categories such as school shoes, safety footwear and slippers provide a degree of dependable demand. This means there is minimal inventory risk and low levels of sale mark down activity, reflected in its resilient product margin at 61.4% (FY21: 61.3%).

* Expanding product range & demographic reach: Larger format stores enable the Group to extend in-store product range from the core 300 Shoe Zone styles with additional brands (475 to 600 styles in Hybrid stores, 675 styles in Big Box stores), adding higher priced products and appealing to a broader consumer demographic. Its shoehub ecommerce platform extends this even further, with >3,000 styles across more than 135 brands.

* Complementary hybrid model with low return rates: SHOE’s ecommerce platform shoehub has grown rapidly through COVID, contributing c.15% of FY22 revenue. Unlike other ecommerce businesses product returns rates are incredibly low at 11.3% (having normalised from COVID lows of 8.4%) and the Group’s hybrid model means reverse logistics are exceptionally efficient, with 70% of online returns transacted in store with nominal incremental cost to the business.

* Debt free, cash generative: SHOE is debt free, with £13.9m net cash on 2 April 2022. It offers an attractive dividend yield of 3.7% based on a modest 40% pay-out ratio alongside its current share buyback programme and scope for future special dividends to distribute excess.

* Strong management team: It is impossible to be anything other than impressed by management’s detailed and in-depth knowledge of all parts of the business reflecting longstanding relationships and meaningful personal investment.

* Compelling valuation: Despite a marked recovery in share price from COVID lows, SHOE trades at just 10.8x FY22E PE. Current trading momentum, combined with self-driven store transformation suggests strong upside to trading over the medium term. A robust cash-backed balance sheet underpins an attractive dividend yield, supplemented by share buybacks and scope for future special dividends to return excess cash to shareholders.

[bountyhunter] 08/9/2022 21:02

4 Sep '22 - 17:43 - 1875 of 1880
0 0 0
With Zeus involved and buybacks rather than dividends I believe the major shareholders are looking to take the business private.

That's what I've been thinking all along and the main reason why I invested here. It's just taking a bit longer than I had anticipated!

[edmundshaw] 08/9/2022 20:36

[for the buyback programme] the maximum price paid per Ordinary Share shall not exceed the higher of: (a) 105 per cent. of the average trading price [...] as derived from the middle market quotations for an Ordinary Share on the London Stock Exchange Daily Official List for the five trading days immediately preceding the date on which an Ordinary Share is contracted to be purchased; and (b) the higher of the price of the last independent trade and the highest current independent bid on the trading venue where the purchase is carried out. Subject to this price limit, the Company has also stipulated that Ordinary Shares may be purchased for no more than 200p per Ordinary Share.

As I cannot work out exactly what (a) means and how to calculate it, I am looking t the share perice graph and it seems that Shoezone's broker can start buying at around 160p pretty imminently. Unless selling interest goes up significantly though, I am not sure it will be easy to use up £3.5min 2 months...

[chinahere] 04/9/2022 20:15

To add I see that they are cancelling the 500,000 shares they hold in Treasury. I did think that they would use these for some sort of LTIP, but obviously they are not.

Perhaps they are are trying to remove more of the 49% then. I wonder if they will extend to more than the £3.5 million buybacks later in the year?

[chinahere] 04/9/2022 20:09

If a buyout was imminent they wouldn't need to distribute the cash. They have over 50% of the company and I reckon the cash (which they effectively own most of) would help in the financing of buying the other 49% out.

The share buybacks may push the share price higher so existing holders may expect an even higher premium if a buyout was suggested.

Of course the management here is good and they may prefer to buyout 'honourably' at a fair price for all? Like you these are just thoughts, but SHOE is a good company eitherway.

[forthelongterm] 04/9/2022 18:26

My thinking is that they have so much cash they will have either to give a large dividend or share buyback. A large dividend will give money to other shareholders. Share buybacks give them an increase in percentage of the company. I wonder if that is why they have a put a limit on the share price for the buybacks. This prevents overpaying as the buyback raises share price. Only some thoughts though

[chinahere] 04/9/2022 17:46

Wouldn't they prefer to keep the cash in the business rather than buyback shares if they were going to take it private?

[forthelongterm] 04/9/2022 17:43

With Zeus involved and buybacks rather than dividends I believe the major shareholders are looking to take the business private.

[edmundshaw] 02/9/2022 12:50

I don't care if they buy two million shares or two thousand I am just happy they are not going to overpay for even one.

[zangdook] 02/9/2022 09:55

1871

That's ok, at some point the market has to take over and it's better not to overpay.

[orchestralis] 02/9/2022 09:08

At this rate they will get to £2 in no time at all.

[babbler] 02/9/2022 08:50

does limit the upside a little to 2 quid however? Subject to this price limit, the Company has also stipulated that Ordinary Shares may be purchased for no more than 200p per Ordinary Share.

[bountyhunter] 02/9/2022 08:33

A step in the right direction :)

[edmundshaw] 02/9/2022 08:30

I am gobsmacked - a share buyback with an upper price limit that pretty much ensures buybacks will only happen when it is clearly a good deal? When did we last see that in the UK?? Warren would be so proud. And I am 100% behind that approach. There are a few FTSE100 CEOs that could learn from this management...

[18bt] 02/9/2022 07:06

Share buyback should help stabilise the price.

[niklol] 01/9/2022 19:12

Also added.
No idea how long we will have to wait for the share price to go up now however!

[niklol] 01/9/2022 19:08

My last message was ib response to BURN 248

[niklol] 01/9/2022 19:00

How bizarre!

[edmundshaw] 01/9/2022 17:05

I have added too in the last couple of days. Thank you Mr. Market xxx :))

[burn248] 01/9/2022 17:00

Because I've bought two lots today,they where marked as sells.

[niklol] 01/9/2022 16:56

How do you know???? And why does that happen. If you could explain i would appreciate. Sorry but I don't understand!

[burn248] 01/9/2022 14:33

A lot of buys put through as sells!!!

[niklol] 01/9/2022 13:29

Personally I think just profit taking after the rise.
There were loads of sells and no buys this morning, noy buys are coming through again

[chinahere] 01/9/2022 13:23

Fear in the market. will the electricity and gas costs be punishing? Will the consumer stop spending? etc.