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Shoe Zone – shares jump on ‘ahead of expectations’ update, but still an income buy

By Tom Winnifrith & Steve Moore | Thursday 18 October 2018

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

Shoe Zone (SHOE) “now expects to report a full year profit before tax for the year ahead of market expectations and in excess of £11.0m”

This compares to a year ended 30th September 2017 £9.5 million – and is with 1.8% revenue growth, to approximately £161 million, despite having opened 16 and closed 20 stores (ending the year with 492 stores), and “margin performance from the spring/summer ranges as well as benefiting from progress achieved through the further development of the group's foreign exchange hedging policy”.

It adds 10 of the store openings were the continued roll out of the ‘Big Box’ format, though that “improvement is due to strong performance across the business, with both physical (Big Box and traditional Shoe Zone stores) and digital channels demonstrating growth allied with the completion of the loss-making store rationalisation programme”. Also, noting “the new financial year has started well and there are a further 14 Big Box openings planned” and “an approximate net cash balance of £15.7m (2017: £11.8m)”, it “anticipates that £4m of excess cash will be distributed as a special dividend to shareholders in March 2019”.

That equates to 8p per current share, with a current circa 180p share price giving an approximately £90 million market capitalisation. With the results bearing out this “UK's largest value footwear retailer” is well suited to current market conditions and with it still offering a prospective more than 6% dividend yield just via the ordinary payout, for particularly income, the shares remain a buy.

This article first appeared on the N50 website which Tom Winnifrith runs with Steve Moore & Lucian Miers. To access the website - where 5 new share tips went live last week click HERE

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