Shoe Zone Share Discussion Threads

[lingy] 29/1/2018 17:41

Got some of these this morning seem fairly cheap with a good dividend and the chart looks like it's bottomed ,hopefully one to sit back and forget about for a while.

[boonkoh] 25/1/2018 12:45

CFO is a little stingy. Only stumping up the cash to buy 350 shares!

[boonkoh] 16/1/2018 13:18

Thanks, that makes sense now.

[bookwormrobert] 16/1/2018 12:21

It was tipped on share prophets...

[masurenguy] 14/1/2018 09:10

Edmund - totally agree with your sentiments in #437 above. I've been invested here for 31 months and, although the current shareprice is just a few pence below my current average cost (163p), I've already had 44p in dividends during that period, which in itself represents a 27% return on my investment over that timeframe and an average of 10.4% per annum.

I think that if the Big Box concept is working well then they may deviate from their flexible store operation model for that particular set up. That obviously remains to be seen but however they treat that going forward I can't see them making any changes to their regular store strategy. This gives them an advantage against competitors like Deichmann who have much nicer, larger and permanent store locations but therefore have greater overheads and less flexibility in any downturn.

I'm also very comfortable with their balance sheet, cash position and the transparency and consistency in their trading updates and subsequent results. I also like the fact that the Smith brothers still retain 50% ownership here and that their interests also seem to be aligned with the other shareholders.

I've updated the current major shareholders in the header. It is interesting to note that the top 5 institutional investors hold 38% so the current free float is only 12%, which of course means that the shareprice can move on quite small trading volumes.

[my retirement fund] 14/1/2018 00:35

Yea I see they got hurt on the brexit fall so have now started hedging in earnest. This is a big red flag as the currency is rising and thay could have been making back some of last years unhedged losses.Instead they feel its more sensible to make some comercial foreign exchange department and its bankers much wealthier.

[my retirement fund] 14/1/2018 00:21

The bit about currency hedging worries me. I mean its a bit late now to be doing it after brexit and now that sterling is improving against the dollar, the last thing you want to be doing is anchoring your inventory orders to the ground as your primary customer currency rises.I've seen this kind of thing wipe out entire companies as the management gleefully played with fire hedging left right and centre

[edmundshaw] 13/1/2018 10:24

Summary (and my reasons for investing): good yield, low and flexible rents, growing on-line and resilient in a downturn, plus some growth prospects with Big Box. No debt, vanishing pension deficit.

Paul Scott makes some good points about margins and working capital. I assumed the adverse impact of foreign exchange on imported goods was hitting the profits via the hedging losses, which were taken after computing gross margins (which is a reasonable, long-term approach: if there are one-off gains in the future, this would not naturally be reflected in margins). I shall look at that again.

The only small fly in the ointment, might Big Box impact the flexible rental model? Apart from that detail, seems a nice share to hold.

[masurenguy] 11/1/2018 14:01

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"!

[fenners66] 10/1/2018 08:01

Well as I suspected when they made their announcement some months ago - No special dividend.

[masurenguy] 10/1/2018 07:42

Solid set of results as expected with a marginal increase in the dividend and growth in online sales contributing 21% of total pretax profits.

RNS Number : 4227B
Shoe Zone PLC
10 January 2018

Preliminary Results

Shoe Zone plc, the leading UK value footwear retailer, is pleased to announce its Preliminary Results for the 52 weeks ended 30 September 2017.

Financial Highlights

-- Revenue of £157.8m (2016: £159.8m) reflecting the continued planned closure of loss making stores
-- Product gross margin strengthened to 63.2% (2016: 62.0%)
-- Statutory Profit before tax of £9.5m (2016: £10.3m), primarily due to the adverse impact of foreign exchange on imported goods into the UK
-- Earnings per share of 15.8p (2016:16.9p)
-- Strong cash conversion with cash balance of £11.8m (2016: £15.0m)
-- Proposed final dividend maintained at 6.8p per share (2016: 6.8p)
-- Total dividend of 10.2p per share (2016: 10.1p)

Operational Highlights

Product:

o Average transaction value improved by 3.3% during the year

o Footwear orders placed directly with overseas factories increased to 84.7% (2016: 72.2%)

o Non-footwear ranges continued to grow, with revenue up 14.5% to GBP8m

Store portfolio:

o 21 new stores opened and 29 refits completed

o Six of these new stores were the continued roll out of the Big Box format, with three additional Big Box concept stores opened since year end

E-commerce:

o Overall multichannel revenue increased by 34%, delivered GBP2m contribution in 2017

o Shoe Zone products now available in the US, alongside continuing presence in France, Germany, Spain and Italy via Amazon Marketplace

Nick Davis, Chief Executive of Shoe Zone plc, said: "I am pleased with the Group's performance in what continues to be a challenging retail environment. We are still well positioned in the market given our strong value retail proposition and continue to manage our store portfolio successfully through our ongoing store rationalisation and refit programme. Following a successful trial of the Big Box concept during 2017, we are now targeting 10 new Big Box stores per year in the medium term. We continue to make good progress against our strategic objectives and have made a solid start to the year with trading in line with expectations. The Board remains positive about the outlook for the Group for the remainder of the year."

There will be a presentation for analysts at the offices of FTI Consulting, 200 Aldersgate, London, EC1A 4HD, at 9:30am on 10 January 2018.

[edmundshaw] 09/1/2018 09:13

Due to the capex (Big Box etc) I am not expecting the huge special dividend of last year. But I am assuming that is more a function of short term cash flow than long term profitability. We shall see...

[masurenguy] 09/1/2018 08:37

Y/E results due tomorrow. The Y/E trading update was moderately upbeat so there shouldn't be any negative surprises and hopefully the impact of the Big Box stores may provide some further upside.

"The Group has traded well in the second half of the year and expects to report revenues for the 52 week period of approximately £158m (2016: £159.8m), reflecting the continued planned closure of loss making stores. The business continued to develop during the year at pace with continued roll out of the new Big Box stores and expansion into new online channels. Despite the impact of foreign exchange headwinds, the Board expects to deliver full year Profit before Tax broadly in line with expectations. The Group continues to have strong cash conversion and closed the year with an approximate net cash balance of £11.8m (2016: £15.0m). There have been no significant unexpected changes in the financial position of the Group since the publication of the Interim Report for the half-year ended 1 April 2017." Y/E Trading Update: 24 October 2017.

[tanneg] 12/12/2017 17:58

After the warm weather warning of 2015, I wonder if the cold weather conditions we are currently experiencing will help with the sale of higher margin long leg boots!

[masurenguy] 12/12/2017 15:36

Could be a gradual shareprice rise into the FY results in 4 weeks time (January 10) on the back of the year end update that was issued 7 weeks ago.

[edmundshaw] 26/10/2017 12:19

I'd say the good income is worth buying; and if people buy that income it will push the price up. As the Big Box rollout is going ahead after good early trading, and loss-making stores are being closed, there seems to me some upside potential from growth too.

[masurenguy] 25/10/2017 16:19

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."

[masurenguy] 24/10/2017 09:08

There you go!

"The Group has traded well in the second half of the year and expects to report revenues for the 52 week period of approximately GBP158 million (2016: GBP159.8 million), reflecting the continued planned closure of loss making stores. The business continued to develop during the year at pace with continued roll out of the new Big Box stores and expansion into new online channels. Despite the impact of the foreign exchange headwinds that continued through the second half, the Board expects to deliver full year Profit before Tax broadly in line with expectations.

The Group continues to have strong cash conversion and closed the year with an approximate net cash balance of GBP11.8m (2016: GBP15.0m). The Group ended the year with 496 stores, having opened 21 and closed 35 during the period. Within the 21 store openings, six were the continued roll out of the Big Box format with latest format Shoe Zone stores being the remainder. There have been no significant unexpected changes in the financial position of the Group since the publication of the Interim Report for the half-year ended 1 April 2017."

Nick Davis said at the interims "I am pleased with the Group's performance in the first half as we continued to actively manage the retail estate while driving profitable sales......The Group has traded broadly in line with management's expectations since the period end and the Board continues to look to the future with confidence"

Consistent reporting on performance with no nasty surprises !

[mister md] 24/10/2017 08:41

yep, boring is good ;)

[andyj] 24/10/2017 08:32

Well that's why we love this share, strong cash generation, good yield and no nasty surprises. Strong and stable...hang on isn't a quote from someone?

[boonkoh] 23/10/2017 14:02

A trading update was issued around this time last year. Definitely need some news flow, this share is so dead.

[eastbourne1982] 29/9/2017 19:49

I see someone dumped a shed load of these a few days ago (27th Sept) at £1.45, £273,000 worth of shares, the shares were sold well under the market price that day so you have to wonder why someone wanted to offload that amount.

I don't hold any but I am watching with interest.

[masurenguy] 29/9/2017 16:55

No idea whatsoever - unless there is some unexpected bad news lurking somewhere in the pipeline. The price drop followed 4 Sells, with a combined total of 5622 shares, after 15.00 hours today so there has not been any meaningful sell off.to trigger any price drop

[fenners66] 29/9/2017 16:18

Sudden drop this p.m.
Anyone know why?