Christmas has come early – if you fancy a festive investment
WITH less than ten days till Christmas, this week is crunch time for many retailers, struggling to hit their targets and deliver decent sales growth.
Lancashire-based Findel is in a rather different position. A value retailer operating online and via catalogues, its product sales were up 13 per cent over the past 12 weeks, compared to the same period last year.
The company is growing fast and chief executive Phil Maudsley is determined to continue in the same vein, more than doubling retail sales over the next five years, from £400million to £1billion.
Yet Findel shares have been hit by general stock market malaise and concerns about the retail sector in particular. In July, the price was £3.02. Last week, the stock closed at £1.77. This does not reflect the company’s performance or its prospects and the shares should recover in the coming months.
Findel has a chequered history. Originally a greeting cards and gift wrap firm, it overexpanded in the late 90s and early 2000s, only to retrench, raise money on the stock market and seek help from its banks after the financial crisis. The company staged a partial recovery but, until recently, was still dealing with legacy issues, not least the PPI scandal, under which it had to compensate thousands of customers who were mis-sold insurance products in the past.
The group has a high-profile shareholder too, Mike Ashley’s Sports Direct, which owns 29.9 per cent of the shares. Although perceived as an issue by some observers, Maudsley maintains relations with the rumbustious Ashley are entirely cordial and could even benefit Findel in the future.
Maudsley took the helm in April 2017, having worked his way up the company since 1987. A robust Northerner, he is determined to focus the company on its core strength as a value retailer.
Today, Findel comprises two divisions – a retail business operating under the Studio brand and an educational supplies subsidiary, Findel Education.
Studio, which generates most of the revenue and more than 90 per cent of the profits, sells an extremely wide range of products – clothing, kitchenware, furniture, household goods and a gamut of Christmas-related paraphernalia, trees, decorations and lots of children’s toys.
Customers’ average household income is between £25,000 and £30,000, they are canny shoppers and they do not intend to overpay.
Initially, the business centred on catalogue sales. Now, more than 70 per cent of customers shop online and the proportion is rising rapidly. The shift to online is beneficial on several levels. Customers tend to buy more, once they see the range of goods on the website, service is slicker and Findel gains valuable information about what customers like and what they do not.
The website is also attracting hundreds of thousands of new shoppers. Customer numbers have grown by 40 per cent over the past two and a half years to 1.9million and Maudsley believes they can comfortably reach 4 million in the medium-term.
At the same time, he is keen to increase the amount they spend. Average annual expenditure per customer is around £250, less than half that of other value-based retailers. Investment in the website, advertising and word of mouth should make a considerable difference over the next few years.
Findel also offers its customers credit and more than half of them take it. Not only does this generate plenty of profit for the company, it is also much appreciated by cashstrapped shoppers.
The education business had been neglected in recent years but Maudsley is taking steps to put it back on its feet and early signs are encouraging. Over time, the division will probably be sold, allowing Findel to focus solely on the retail offer. Brokers forecast sales of £506 million and profits of £28.5 million in the year to March 2019, rising to £537million and £31 million in 2020.