Shoe Zone analyst Zeus upgrades FY22 adjusted PBT forecast

Shoe Zone plc (LON:SHOE) Better than expected demand and further strong margin performance leads to an upgrade in FY22E adjusted PBT from “no less than £8.5m” to “no less than £9.5m”. Zeus revenue forecasts increase by £1.5m (1.0%) to £157.4m and adjusted PBT forecasts (adjusted to exclude profit on the sale of freehold property and foreign exchange revaluations) increase by 12.0% to £9.5m.

¨ Trading update and forecasts: Higher than expected demand for summer products, increases our FY22 revenue estimate by £1.5m to £157.4m (+1.0%). There have also been further improvements in supply chain and cost management, leading us to increase our gross margin and operating margin assumptions for FY22E. This results in an upgrade to adjusted PBT of 12.0% to £9.5m. Today’s positive statement follows less than four weeks after a 30% adj. PBT upgrade that was communicated on 29 June, representing strong trading despite high inflation and the ongoing cost-of-living crisis. The adj. PBT upgrade drops through to a 12.0% upgrade to FY22E adjusted EPS (now 15.2p). We leave FY22E DPS unchanged at 6.8p. FY22 closing net cash (excluding leases) increases by £1.0m to £16.3m, reflecting higher expected profits. Trading forecasts for FY23E remain unchanged, although net cash is higher due to higher expected FY22E closing cash. Changes to forecasts are summarised in Exhibit 1 on page 2.

¨ Investment case: Shoe Zone’s model is highly defensive, operating in a part of the footwear market which represents a relatively non-discretionary spend to most consumers (school shoes, work boots etc.) and underpinned by a degree of structural, recurring demand (feet grow). In our view, Shoe Zone’s attractive value proposition means it is well placed to win market share as consumers seek more affordable alternatives against the current backdrop of high energy costs and food price inflation. In addition, the Group’s ongoing strategy of store rationalisation and its growing ecommerce offering means it has the potential to deliver attractive medium-term earnings growth, despite the more challenging near-term consumer outlook.

¨ Valuation: Based on latest Zeus forecasts, Shoe Zone trades on an FY22E P/E of 12.2x and an EV/EBITDAR (EV includes capitalised lease liabilities and EBITDAR includes depreciation on lease assets) of just 3.3x, with a dividend yield of 3.7%. The robust trading momentum so far this year has been very encouraging, and we continue to see scope for strong growth in Group earnings over the medium term. Our DCF implies a further 9.9% upside based on conservative assumptions, as detailed in our initiation note (“Best Foot Forward” October 2021).

Summary financials

Market Cap£92.5m
Shares in issue50.0m
12m Trading Range61.5p– 190.0p
Free float23.10%
Next EventFY22 trading update – October

Financial forecasts

Yr end Oct (£’m)2020A2021A2022E2023E
y.o.y growth (%)-24.2-2.832.13.5
Adj. EBITDAR14.828.932.629.8
Adj. EBIT.-12.79.9118.3
Adj. PBT-
EPS (p) ful dil. adj-23.813.515.211
DPS (p)6.85.5
Net (debt)/cash†6.314.616.317
P/E (x)n/a13.712.216.8
Div Yield (%)3.73
† Excluding IFRS 16 lease liabilities
^including IFRS 16 lease liabilities
Source: Audited Accounts and Zeus estimates
Click to view all articles for the EPIC: ,
Or click to view the full company profile:
    Shoe Zone plc

    More articles like this

    Fintel plc

    Fintel core revenue growth is higher than Zeus forecast

    Fintel plc (LON:FNTL), the leading provider of Fintech and support services to the UK retail financial services sector, has released a trading update for the six months to 30 June 2022, which reveals: Core revenue grew

    OnTheMarket Plc

    OnTheMarket analyst Zeus confident in forecasts

    Foxtons, one of London’s leading estate agencies with more than 50 interconnected branches across London, has signed an agreement to advertise its UK residential sales and letting properties at OnTheMarket plc (LON:OTMP). Zeus view: Foxtons, the

    SpaceandPeople analyst Zeus restores estimates and valuation

    SpaceandPeople plc (LON:SAL) secures, sells, and manages flexible space for brand experiences, short term promotions and retailing in high footfall venues for its customers, including in shopping centres and travel hubs. The Group has issued a

    Lookers Plc

    Lookers shares are still undervalued says Zeus

    Lookers plc (LON:LOOK) has released an H1 trading update reporting a continuation of strong performance year to date. H1 2022 underlying PBT is expected to be c. £45m and Management anticipate full year PBT will also


    Inchcape performance exceeding expectations says Zeus

    Inchcape plc (LON:INCH) has released another positive trading update, with performance exceeding expectations so far this year. This follows on from a positive Q1 update on 28 April. Through quarterly improvement in Distribution volumes and operating

    boohoo Plc

    Boohoo Group analyst Zeus sees a strong performance in Q1

    ¨ Q1 financial highlights: Boohoo Group plc (LON:BOO) revenue of £445.7m is -8.3% YOY vs. a strong comp (Q1 FY22 revenue +32.1%), in line with Zeus’s forecast and management’s previously stated guidance. Gross sales growth remained

    AssetCo plc

    AssetCo performs better than forecasts says Zeus

    AssetCo plc (LON:ASTO) has just completed its acquisition of River and Mercantile Group “RMG”, which has resulted in an increase in shares in issue from 8.4m to 14.4m. RMG has an “established and well-respected equities team