European electricals retailer Darty (DRTY) is in demand, the shares sparking up 5.3% to 104.5p as a strong third quarter trading statement shows its recovery strategy is on track. Like-for-like sales in France grew 4.4% in the quarter, though perhaps the headline-hogging 'new' news is the further improvement in the retailer's cash performance.
Click here to read the update for the quarter to end-January from the white goods purveyor, which trades from over 400 stores in three European countries and agreed the terms of a recommended offer from rival French retailer Groupe Fnac (FNAC:PA) last year (20 Nov). For more on the deal rationale, read our story from September.
One key takeaway from the update is that cashflow has been strong. Darty's average debt over the period was down by a bumper €100 million year-on-year, reflecting improved working capital management and leaving Darty on track to achieve a €40 million reduction in year-end net debt.
CEO Regis Schultz (pictured below), architect of the retailer's turnaround, flags brisk business over the Christmas and winter sale periods from Darty France, which outperformed the market despite the adverse footfall impact from the Paris terror attacks.
Says Schultz: 'We were well prepared for and traded well over the Christmas and winter sale periods, with a wide range and good availability of products. Whilst footfall in stores reduced, conversion rates improved. As a result of our good social relations we were one of the first retailers able to open additional stores on a Sunday, with those opened in Paris seeing double digit sales growth.' Schultz also flags 53% growth in click and collect sales and record Sunday trading on Darty.com during the Black Friday weekend.
Over in Belgium, where Darty trades as Vanden Borre, a third successive quarter of positive same-store sales was delivered, while Dutch chain BCC's performance improved following recent troublesome IT and warehouse management issues.
One omission from the statement is a bit of commentary on the offer from Fnac, valuing Darty at circa 113p per share and being pored over by the competition authorities in France and Belgium. Liberum's Wayne Brown maintains his 'buy' rating and 160p price target for Darty ahead of the anti-trust ruling in the second quarter, flagging a significant discount to the offer price and arguing Darty's prospects as a stand-alone business remain undervalued.