MFI Furniture has been one of the retail sector’s best performers of late, enjoying a surging run that has seen the shares double in the last six months and rise three fold in the past three years.
The bedrock of recent growth has been a push into “all rooms in the house” taking MFI into bathrooms and living room sofas as well as bedrooms and kitchens. A refurbishment programme, which is seeing some of MFI’s 191 UK stores being given a stylish Conran makeover, is also sprinkling fairy dust on the figures.
The question is whether the company can keep it up. First-half profits were up to £59m from £46m last year and like-for-like sales in the UK stores were up 5.1 per cent on the same period in 2002. There is no sign of a slowdown since the half-year.
The good news is that only two-thirds of the estate has been overhauled meaning there is still some upside to go for. Operating margins in the 100 stores refitted so far have jumped from 5 per cent to 9 per cent, showing there is a profit as well as a sales gain. Those that have received the full treatment are showing sales uplift of 25 per cent. Partial refits have performed less well and a new way of doing these is being tested, with a decision due soon.
Meanwhile MFI’s Howden Joinery subsidiary is enjoying sales growth that is so strong it is almost rude. Like-for-like sales are up 27 per cent as the format becomes increasingly popular with smaller builders. The 280 branches are to be expanded to 300 by the end of the year. Howden’s other growth opportunity is the US where MFI has opened 15 trial stores. The trial will continue for another six months but MFI believes there could be scope for 40 or 50 more.
Assuming full-year profits of £100m, the shares trade on a forward price-earnings multiple of 15. They dipped 7p to 173p yesterday on profit taking and long-standing investors might like to follow suit. More recent converts should hold on.
>From “The Independant” original story here