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No Trimming, Healthy Growth For Shaver Shop
BY JAMES DUNN - 14/10/2016 | VIEW MORE ARTICLES BY JAMES DUNN

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SSG - SHAVER SHOP GROUP LIMITED


The hipster, the metrosexual and the modern woman are the target markets of specialist retailer Shaver Shop Group Limited (SSG), which arrived on the stock exchange in July.


You would think that the hipster beard phenomenon would be bad news for a company that sells shaving equipment – but you’d be wrong. Australia’s hipsters love to pamper their beards, with beard oils, balms, shampoos and conditioners, and they love to sculpt them with beard trimmers and grooming kits. And their partners – male or female – love to buy these things for them.

The hipster, the metrosexual and the modern woman are the target markets of specialist retailer Shaver Shop Group Limited (SSG), which arrived on the stock exchange in July. With 103 stores across Australia and New Zealand – 87 company-owned and 16 franchised stores – as well as its websites www.shavershop.com.au and www.shavershop.net.nz, and an eBay store, Shaver Shop specialises in personal grooming. But not just for men: the company says 53 per cent of its customers are females, shopping either for themselves or someone else.

As the name suggests, the range is led by shaving equipment – electric and manual – but is rounded out by beard trimmers, hair clippers, parts and accessories, grooming products, oral care products, ladies hair removal and hair styling products, massage equipment, wellbeing products, cosmetics and even clippers, trimmers and shavers for pets. Shaver Shop stocks more than 3,000 items.

From $22.8 million in sales in FY13, and a net profit of $2.2 million, the company’s prospectus forecast $106.2 million in sales in FY16, rising to $127.1 million in FY1, giving net profit of $7.5 million in FY16 and $9.1 million in FY17.

The reported FY16 numbers came in at revenue of $106.7 million – up 68.7 per cent – and net profit of $8.4 million, down 54 per cent.

Like-for-like total store network sales rose by 10.7 per cent, versus the prospectus forecast of 10.4 per cent growth. Online sales grew 42.6 per cent. The strongest category performers were complementary products (hair care and power oral care), which grew by almost 30 per cent, and hair removal sales, which were up by 11.8 per cent.

Shaver Shop opened 16 new greenfield sites and completed eight franchise-store buybacks in FY16, with the 100th store opened in Ocean Keys, Western Australia, just before the share market float.

So far in FY17, the company has bought back four stores and has committed to eight new greenfield sites, versus four in the prospectus forecast for the first half of the financial year. Shaver Shop has a target of 145 stores across Australia-New Zealand within three years.

Shaver Shop says the domestic “wet shave” market in Australia is worth $387 million, but it only has about 3 per cent of this highly fragmented market. The company sees a big opportunity to continue increasing market share in this category, which it aims to do by continually evolving its range to cater to changes in personal grooming styles, new fashion trends, and product innovations, and leveraging its long-standing relationships with major suppliers to continue to source new and innovative products on an exclusive release basis.

Nearly all of the $98 million that Shaver Shop raised in its initial public offering went to fund payments to existing shareholders, including pre-IPO dividends and exit bonus payments, and repay debt. This might seem surprising given the company’s quite aggressive expansion plans, but Shaver Shop is adamant that these are capable of being funded from profits and cash flow.

Existing shareholders also shared in $18.2 million worth of pre-IPO dividends and $1.9 million worth of loan repayments and share-based and cash exit bonus payments.

The share market did not seem to mind. The shares ended up being priced at $1.05, well short of the top end of the $1.03–$1.30 range that Shaver Shop was seeking, but there was heavy demand toward the lower end of that range, and the float was about two times oversubscribed. On debut, on July 1, Shaver Shop Group shares opened at $1.11, a 6-cent (5.7 per cent) premium to issue price, and closed at $1.085 on their first day with almost 11 million shares traded. The shares have traded as high as $1.22, in June and again in September, but have come back to $1.13, which capitalises Shaver Shop at $283 million.

Shaver Shop says it is well positioned to achieve the FY17 component of its prospectus forecasts. From the 6 cents per share earned in FY16 (which matched the prospectus forecast), the analysts’ consensus, on Thomson Reuters’ numbers, expects a 30 per cent lift in earnings per share (EPS) in FY17 to 7.8 cents, with a maiden unfranked dividend of 4 cents (Shaver Shop intends to target a dividend payout ratio of approximately 50 per cent of net profit after tax).

On those numbers Shaver Shop is priced at 14.5 times prospective FY17 earnings, and an unfranked dividend yield of 3.5 per cent. Those are relatively undemanding numbers, and the analysts’ consensus target price, at $1.45, sees ample scope for this impressive retail newcomer to continue to consolidate its solid debut on the stock market.



View More Articles By James Dunn

James was founding editor of Shares magazine, and oversaw one of the most successful magazine launches in Australia. He has also written for BRW, Personal Investor, The Age and Management Today, and was subsequently personal investment editor at The Australian and editor of financial website, investorweb.com.au



 

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