Fourlis | Waiting on that Greek recovery…
In our new note on Fourlis we argue that a convincing inflection of the domestic home furnishing business remains elusive, as a result of “erratic†trading in the market, the upswing in competitor activity and the limited underpinning provided by disposable income. In the light of subdued trading at domestic IKEA in Q2 and Q3, we have revised downward our FY18e EBITDA (c-5%, at €46m). We assume 2019 will be the tipping point for Greek IKEA (sales +5%) but we are circumspect about the extent of the recovery, especially against the background of a complex international environment and in view of political developments domestically.Having said that, we argue that IKEA’s recent strategy pivot towards small-scale stores presents Fourlis with an interesting opportunity for capacity-driven growth in the coming years, something not factored in market estimates yet. Our initial assessment of the economics of the new concept suggests that the payback period could be as short as 3-4 years, thereby leading to pre-tax IRRs in the high-teens.
In our view, Fourlis remains a credible story geared into the recovery, enjoying a healthy debt maturity profile and consistent cash flow generation.
Co. is engaged in the manufacture, import and distribution of electrical household appliances and the manufacture of FOURLIS kitchen hoods. In addition, through a subsidiary, Co. is engaged in the operation of a retail chain.
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