Small Cap Value Report (Thu 11 Jan 2018) - TSCO, MKS, John Lewis, BOO, GMD, CARD, AO., GMD, LRM

Thursday, Jan 11 2018 by

Good morning, it's Paul here.

I got up early today, to finish off yesterday's article (was too tired last night to do any more work). So I've added new sections on ShoeZone results, and Focusrite's trading update. So to get you started today, here is the link for yesterday's expanded report.

It's an absolute avalanche of trading updates today, here are some quick bullet points on mid to large cap retailers, which might be of interest, for read-across to smaller companies, and the economy generally (we need to keep our eye on the macro picture);

Tesco (LON:TSCO)

  • Seems to be trading well.
  • Positive Q3 LFL sales of +2.3% on a LFL basis.
  • Positive Xmas trading, +3.4% LFL in food
  • Problems at Palmer & Harvey, and "ongoing drag" from general merchandise - "took the shine off an otherwise outstanding performance"
  • We are confident in the outlook for the full year and are firmly on track to deliver our medium-term ambitions."

Marks and Spencer (LON:MKS)

Q3 update, for 13 weeks to 30 Dec 2017

  • Full year guidance remains unchanged
  • Total UK LFL sales down -1.4%
  • Food better (-0.4% LFL) than clothing & home (-2.8% LFL)
  • eCommerce growth only +3.0%
  •  "M&S had a mixed quarter with better Christmas trading in both businesses going some way to offset a weak clothing market in October and ongoing underperformance in our Food like-for-like sales...

John Lewis

Update for 6 weeks ending 30 Dec 2017

  • Waitrose LFL sales up 2.2% (adjusted for New Year's Eve mismatch)
  • John Lewis LFL sales up 3.1%
  • Black Friday went well, so looks like a permanent fixture in the retail calendar now.
  • "The pressure on margin seen in the first half of the year has intensified because of our choice to maintain competitive prices, despite higher costs mainly due to the weaker exchange rate. This will negatively affect full-year financial results as indicated previously."
  • "Looking ahead to 2018/19 we expect trading to be volatile due to the economic environment and anticipate that competitive intensity will continue, driven by the structural changes taking place in the retail industry. "

So, sounds like many retailers will continue to struggle in 2018. Good news for consumers though.

Boohoo.Com (LON:BOO)

(at the time of writing, I hold a long position in this…

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Tesco PLC (Tesco) is a retail company. The Company is engaged in the business of Retailing and associated activities (Retail) and Retail banking and insurance services. The Company's segments include UK & ROI, which includes the United Kingdom and Republic of Ireland; International, which includes Czech Republic, Hungary, Poland, Slovakia, Malaysia and Thailand, and Tesco Bank, which includes retail banking and insurance services through Tesco Bank in the United Kingdom. The Company's businesses include Tesco UK, Tesco in India, Tesco Malaysia, Tesco Lotus, Tesco Czech Republic, Tesco Hungary, Tesco Ireland, Tesco Poland, Tesco Slovakia, Tesco in China, Tesco Bank and dunnhumby. The Company's brands include Finest, Everyday Value, Chokablok and Technika. Finest and Everyday Value are the two food brands in the United Kingdom. The Company offers a range of personal banking products, principally mortgages, credit cards, personal loans and savings. more »

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Marks and Spencer Group plc (M&S) is a retailer in the United Kingdom, with over 1,380 stores around the world. The Company is the holding company of the Marks & Spencer Group of companies. The Company operates through two segments: UK and International. The UK segment consists of the United Kingdom retail business and the United Kingdom franchise operations. The International segment consists of Marks & Spencer owned businesses in the Republic of Ireland, Europe and Asia, together with international franchise operations. The Company is engaged in delivering own brand food, clothing and home products in its stores and online both in the United Kingdom and internationally. The Company sells womenswear, lingerie, menswear, kidswear, beauty and home products, serving customers through approximately 300 full-line stores and Website, M& It has approximately 910 United Kingdom stores, including over 220 owned and approximately 350 franchise Simply Food stores. more »

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Boohoo Group PLC, formerly plc, is an online fashion retail group. The Company is based in the United Kingdom and has a strong presence in the United Kingdom, the United States, Europe and Australia, selling products to almost every country in the world. The Company owns the boohoo, boohooMAN, PrettyLittleThing and Nasty Gal brands. These brands design, source, market and sell clothing, shoes, accessories and beauty products targeted at 16-30 year old consumers in the United Kingdom and internationally. more »

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  Is LON:TSCO fundamentally strong or weak? Find out More »

64 Comments on this Article show/hide all

matylda 11th Jan '18 5 of 64

BooHoo - Wow!

Not exactly the same bag but compared to our "High Streeters" Card Factory, Tesco, John Lewis and M&S - What a different world we live in these days!

Blog: Briefed Up
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runthejoules 11th Jan '18 6 of 64

Boohoo.Com (LON:BOO) & GAME Digital (LON:GMD) thirded, also interested in Card Factory (LON:CARD) and Surgical Innovations (LON:SUN) - Surgical innovations TU, 44% revenue growth, gross margins within target range, acquisition going to plan (no position).

In other news, did anyone attend Wey Education (LON:WEY) 's investor evening last night? It has also been plugged in Shares mag so may jump today (I hold)

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MrContrarian 11th Jan '18 7 of 64

My morning smallcap tweet:

Marshall Motor Holdings (LON:MMH), Aukett Swanke (LON:AUK), EKF Diagnostics Holdings (LON:EKF)

Marshalls Motor Holdings (MMH) guides FY beat.
Aukett Swanke Group (AUK) FY rev down 11%, pretax -£325k (+£927k). Outlook: overseas looking better but UK still poor - "Whilst we continue to receive new enquires these are almost certainly for the next cycle which we believe may commence in 2019. "
EKF Diagnostics Hldg (EKF) FY trading - rev in line, adjusted EBITDA iexpected to comfortably exceed expectations.

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matylda 11th Jan '18 8 of 64

In reply to post #296248

Second that - Paul, cannot find any broker updates on Footasylum (LON:FOOT), nada - Would appreciate your comment should you have time (Founders of JD Sports behind it as far as I am aware).

Thanks in advance.

Blog: Briefed Up
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LeoInvestorUK 11th Jan '18 9 of 64

Marshall Motor Holdings (LON:MMH) say they are now virtually debt free, repaying £100m in the period. This has wrong-footed me as I thought they still had considerable debt (despite raising £42m from a disposal), and therefore deserved a greater differential rating to Vertu Motors (LON:VTU) (net cash) than they now do. Stockopedia still reflects £100m debt in the enterprise value and their ratings may start to look better when this is updated. Caveat: Although free of finance debt the new cars they sell are borrowed.

Blog: LeoInvestorUK
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danyou 11th Jan '18 10 of 64

Absolutely loved the BOO update today- Mr Market less so!! I fail to understand that!
Thinking of picking up more...(I am already a holder)

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tic_tac_toe 11th Jan '18 11 of 64

My skim of Card Factory (LON:CARD) was largely positive but the share opened 20% down. Would be interesting to hear your main points of focus on that one, Paul, even if briefly..

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Tristan_Treacy 11th Jan '18 12 of 64

Boohoo.Com (LON:BOO) trading statement had no guidence beyond current year, may have caused some concern leading to initial share price response.

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Wimbledonsprinter 11th Jan '18 13 of 64

In reply to post #296263

On GAME Digital (LON:GMD), I personally was underwhelmed by the operating cash generation in the period -excluding the sale of Multiplay Digital, cash “only” increased by £5m. H2 usually sees a significant cash outflow.

I sold out my small holding on this announcement. Wish all holders good luck.

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runthejoules 11th Jan '18 14 of 64

Boo seems to have done brilliantly with its acquisitions, but they are all for young women. Paul, do you think there would be significant synergies for Boohoo.Com (LON:BOO) in buying Sosandar (LON:SOS) , given their £20m valuation and Boo's £127m cash pile?

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dangersimpson 11th Jan '18 15 of 64

In reply to post #296328

Marshall Motor Holdings (LON:MMH) say they are now virtually debt free, repaying £100m in the period. This has wrong-footed me as I thought they still had considerable debt (despite raising £42m from a disposal),

The debt reduction was flagged in the completion of disposal:

Completion of the Disposal has also further strengthened the Group's balance sheet, with the net cash proceeds being initially used to reduce existing levels of indebtedness (actual reported net debt as at 30 June 2017: £101.1m). As a result of the Disposal, the Group's pro forma balance sheet as at 30 June 2017 would have been ungeared, with net cash of approximately £4.6m and net assets of 254p per share.

Exceeding expectations wasn't expected I guess given the low P/E & very weak market so I'm surprised that there hasn't been a bigger reaction here.

Weirdly they talk about "...ahead of our previously upgraded pre and post-tax expectations." but stockopedia figures show no upgraded consensus over the year.

Another case of 'why cant the company publish the expectations' putting a damper on an otherwise excellent statement from what appears to be a very high quality management team.

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ppdrs 11th Jan '18 16 of 64

GAME Digital (LON:GMD) and Footasylum (LON:FOOT) please if you have time!

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mammyoko 11th Jan '18 17 of 64

A further vote for Footasylum (LON:FOOT), please, Paul

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rmillaree 11th Jan '18 18 of 64

Ref Tesco

ahhhhhhhhhhhhhhhhhhhhhhhhhh Tesco
My continual reminder to ones self that buying one share (and continually adding ) to hold for life is plain silly. What's more silly is that i haven't sold any - a fool and his money blah de blah. Oh well at least the share has only lost 50% over the last 5 years could have been worse i guess. Oh well at least i didn't buy any Globo (hmmmm that will be the alzheimers kicking in.)

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Trident 11th Jan '18 19 of 64

Card Factory (LON:CARD) seems to have amounted to a modest profit warning for the year, with expectation being £7m or so (?) due to forex issues, and increased minimum wage. Increased sales of non card items, with card sales broadly flattish.

It seems the increase in store openings hasn't overcome these other headwind factors.

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pippasfan 11th Jan '18 20 of 64

In reply to post #296378

May be Boo consider is enough to be going on with. Certainly Paul mentioned yesterday about Moss Bros, the problems of men shopping for clothes. Brings me onto the subject of my partners choice of shirts, argh

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Trident 11th Jan '18 21 of 64

Correction re: Card Factory (LON:CARD). Card sales were also up. Hopes for easing of cost headwinds, and by this I suspect they mean Forex?

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Ramridge 11th Jan '18 22 of 64

If today's stellar performance from Boohoo.Com (LON:BOO) hasn't moved the sp needle upwards, then there is just one answer - absolute guaranteed.

Change the company name to Boohoo Blockchain.

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goingbroke 11th Jan '18 23 of 64

Doesn’t PrettyLittleThing display a vulnerability that others could come in and be the go to fashion site? Also, isn’t PLY eating off BooHoos plate ?

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FREng 11th Jan '18 24 of 64

Re yesterday's discussion on Bitcoin, blockchain and other cybercurrencies. I have just heard that the lecture video is now available on the Gresham website here: – together with the written transcript, references and slides.

Hat-tip and many thanks to @timarr (of this parish) for useful comments on an earlier draft.


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 Are LON:TSCO's fundamentals sound as an investment? Find out More »

About Paul Scott

Paul Scott

I trained as an accountant with a Top 5 firm, but that was so boring that I spent too much time in the 1990s being a disco bunny, and busting moves on the dancefloor, and chilling out with mates back at either my house or theirs, and having a lot of fun!Then spent 8 years as FD for a ladieswear retail chain called "Pilot", leaving on great terms in 2002 - having been a key player in growing the business 10 fold. If the truth be told, I partied pretty hard at the weekends too, so bank reconciliations on Monday mornings were more luck than judgement!! But they were always correct.I got bored with that and decided to become a professional small caps investor in 2002. I made millions, but got too cocky, and lost the lot in 2008, due to excessive gearing. A miserable, wilderness period occurred from 2008-2012.Since then, the sun has begun to shine again! I am now utterly briliant again, and immerse myself in small caps, and am a walking encyclopedia on the subject. I love writing a daily report for on most weekday mornings, constantly researching daily results & trading updates for small caps. Cheese! more »


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