I’ve already taken a look at clothing retailers, so I’ll finish my examination of the retail sector today with a few selected general retailers, none of which has exactly stormed ahead this year.
I must include Dixons Carphone (LSE: DC), formed this year from the merger of Dixons Retail and Carphone Warehouse, after the old Dixons gave us a lesson in how to turn round a company heading for the wall. From the start of 2012 until August 2014, Dixons Retail shares five-bagged! At 369p it’s a bit too early to think about how the combined company’s shares are going.
The future for DIY?
Next up is Home Retail (LSE: HOME), which has managed an excellent recovery in its Argos division, turning it from an anachronism into a successful online-led business. Its other business, Homebase, is also in a turnaround plan, and its multi-channel focus is starting to pay off. Home Retail shares, at 179p, are down nearly 40% over 12 months.
Then Kingfisher (LSE: KGF), owner of B&Q and Screwfix in the UK, and several other outlets across Europe. Things have been tough there too, with a 12-month fall of 22% to 320p.
Beleagured Marks & Spencer (LSE: MKS) has seen its shares drop 16% to 427p, as its rejuvenation plan seems to be plodding along slowly. If forecasts prove accurate, there’ll have been almost no overall change in EPS from 2011 to 2016.
And finally Sports Direct International (LSE: SPD), which would probably fit better with fashion retailers as sports clothing is the bulk of what it sells. The share price has dropped 2% in a year to 713p, though over five years it has more than six-bagged.
| Dixons Carphone |
Home Retail | Kingfisher | Marks & Spencer |
Sports Direct International |
|
|---|---|---|---|---|---|
| Market cap | £4.28bn | £1.46bn | £7.59bn | £7.05bn | £4.24bn |
| Year ended | Mar 2014 | Feb 2014 | Mar 2014 | Apr 2014 | |
| EPS change | +35% | +5% | +1% | +19% | |
| P/E | 18.9 | 15.8 | 14.1 | 24.3 | |
| Dividend Yield | 1.7% | 2.7% | 3.7% | 0.0% | |
| Dividend Cover | 3.15x | 2.36x | 1.89x | n/a | |
| Year ending* | Mar 2015 | Mar 2015 | Feb 2015 | Mar 2015 | Apr 2015 |
| EPS change | +22% | +13% | -2% | +4% | +23% |
| P/E | 17.6 | 16.0 | 14.0 | 13.0 | 18.4 |
| Dividend Yield | 1.9% | 2.1% | 3.8% | 4.1% | 0.2% |
| Dividend Cover | 3.01x | 3.12x | 1.98x | 1.88x | 30.8x |
| Year ending* | Mar 2016 | Mar 2016 | Feb 2016 | Mar 2016 | Apr 2016 |
| EPS change | +16% | +9% | +11% | +8% | +14% |
| P/E | 15.2 | 14.6 | 12.7 | 12.0 | 16.1 |
| Dividend Yield | 2.2% | 2.2% | 3.7% | 4.4% | 0.2% |
| Dividend Cover |
2.99x | 3.13x | 2.24x | 1.95x | 25.8x |
* forecast
No screaming bargains
Sports Direct International has a very impressive record of soaring EPS that has taken it from nothing to a £4bn company. A P/E two years out of 16 might be reasonable, providing that double-digit growth can be maintained.
M&S looks reasonably valued and offers nice dividend yields, even if they’re not as well covered as they might be in such a fickle business. But I think it could take a couple more years before we know if its attempted turnaround is going to be successful.
Kingfisher? Well, DIY has fallen out of fashion in recent years, and Kingfisher does a lot of its business in the still-troubled Eurozone. I’m impressed by Home Retail’s progress with Argos, although I’m just not sure what to expect from Homebase.
And old newcomer
That leaves me with Dixons Carphone, and no history for the merged company to look back on. But the recovery at Dixons was masterful (and unexpected by me), and I’ve thought highly of the management at Carphone Warehouse before now.
If I had to take a punt on one of these, I think it would be Dixons Carphone for its intriguing possibilities.
