Maxeda - Home spending continues in Q2

All,

Please refer to our analysis here.

Early in March, we had formed the view that demand for DIY was going to be strong. The company, of course, has had a record quarter despite restrictions and store closures in Belgium. What a performance! So it’s painful not to have followed our own conviction. Pe-Hindsight, our legal and modelling work had revealed just too much hair and too low recovery to risk material exposure. 

Performance:

- Footfall impacted. Outperformance mostly based on materially larger size of shopping basket. 

- Management do not feel that consumers have pulled forward summer purchases.

- Guidance: 2020 EBITDA could be E125m, a strong improvement over 2019 of  E111m - if there are no more lock-downs. CapEx should be around E-42m. 

Caveat: 

- Of the increased cash balance, some E42m are temporary (incl. WC, Tax and social security payments) and should be leaving the company in Q2.

Implications of the call (despite a huge jump in the bonds):

- Demand for home products remains strong post exit from lock-down and is expected to remain so also going forward as the overall focus of consumer spending appears to have shifted.

- Note exposure to home products also at Steinhoff and Matalan (each suffering a stronger lock-down impact) could help those companies improve trading post lock-down.

- Small and medium size boxes are doing better than big boxes.

Wolfgang