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Holding its own: Value retailer Bonmarche going for 'self help' to boost market standing

Publication Date: 12 Jun 2018 - By ReachX Team By ReachX Team
Actionable
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Equity Fundamental Equity UK Consumer

It would be safe to say that London-listed women’s value retailer Bonmarché (LON: BON) has been through the wars in its fiscal fourth quarter.

Overall, for the 12 months to the end of March (2018), in-store life-for-like sales at Bonmarché dropped 4.5%, and headline sales fell 0.5%. However, the worst patch came in the company’s financial fourth quarter during which total sales fell 6.2% on an annualised basis.

Nonetheless, in sync with wider retail industry trends, Bonmarché’s saving grace came in the form of online sales growth. With declines in-store, its online takings grew 34.5% year-over-year. It also largely ensured Helen Connolly, Chief Executive Officer of Bonmarché, could tell investors that she sees full-year profits in line with market expectations, despite a difficult fourth quarter. 

Ahead of its financial results (due on 19 June) and annual general meeting (in July), the market appears to be putting its faith back in the stock. The stated uptick in online sales is not the sole driver of the market sentiment, as Bonmarché, which sells clothing for women over the age of 50, is no BooHoo.com or ASOS. 

But its incremental embrace of digital sales to bolster its earnings, coupled with cost savings across the board, such as a reduced marketing budget and tighter stock control, have stabilised its share price. 

While the stock was at 128p at the start of the current trading year, and is only at 99p at the time of writing this piece equating to a decline of nearly 23%; the current trading level follows a massive 25% dip in January alone following dire sales data and a less than impressive festive period for the company. 

The wider market expectation is that the measures Bonmarché is taking steps, described by its CEO as “self-help initiatives”, that would drive further progress and business streamlining over the next financial year.

It won’t be easy, as turnaround efforts rarely are. The retailer could be hit by unforeseen events. For instance, Bonmarché acknowledges that raw material prices have gone up after the Brexit vote. Unseasonable weather and clearance sales at the failed BHS store chain have dented its takings in the past, and the extent of seasonal discounting it embarks on could also impact its share price.

This is visible in the company’s 52-week range, as the stock price reached a high of 136.50p and slumped to a low of 85p, for the company with a current market cap of just under £50m. That gives Bonmarché a 12-month volatility rating of 42.59, and a 6-month rating of a 47.86. The is latter largely down to January’s 25% share price slump.cContingent upon what Bonmarché says in its latest trading statement, the next 12 months are going to be critical for this specialty retailer. 

Finally, and away from its share price direction, can Bonmarché be regarded as a dividend investment? Probably not, as IG Markets data suggests the stock has only been consistently paying dividends for 4 years. Most brokers only label stocks as income stocks if they have a 10-year minimum track record. That said, Bonmarché is currently generating a yield of just over 7%, which compares favourably to its peers and speciality retail stocks. 

Disclosure:

I have no positions in any of the securities referenced in the contribution

I do not use any non-public, material information in this contribution

To the best of my knowledge, the views expressed in this contribution comply with UK law

I agree with the terms and conditions of ReachX

This contribution is for informational purpose and does not constitute investment advice nor is it an offer to sell or buy, nor is it a recommendation for any security.

ReachX Team

 

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London, United Kingdom

info@reachx.co
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