Bob’s Discount Furniture managed to generate solid sales growth in the first quarter despite multicple challenges facing the home furnishings sector.
The company’s net revenue increased 8.5 per cent to $578.1 million during the quarter ended March 29, with comparable sales up 1.2 per cent.
GlobalData MD Neil Saunders said the growth were solid and significantly above the overall market, given headwinds such as continued reticence among consumers and poor weather conditions. It also underlines that Bob’s is making market share gains.
While a lot of the uplift was driven by new store openings, the positive comparable numbers were “especially pleasing” as traffic was very negatively impacted by poor weather, the analyst continued.
Saunders said the chain has a sharp focus on value, putting it on the right side of many consumer trends. The company is also attracting middle and some higher income shoppers, which is one of the reasons why there has been some good growth in higher ticket items.
“This dynamic speaks more widely to another truth about Bob’s, namely that while it is unashamedly focused on value, it does not engineer this by offering a sub-par experience.
“From our channel checks, almost all of Bob’s stores are nicely laid out, showcase products well, and have strong levels of customer service. The experience is also engaging and fun, which is a point of difference to many traditional furniture retailers,” Saunders said.
The strong top line, however, did not translate will into the bottom line, where net income dropped over 80 per cent. Some of this was due to elevated store opening costs, but there was also an impact from a $2 million termination fee associated with the advisory agreement with a controlling stockholder.
As the termination fee is exceptional, Saunders expects future profitability to lift from this low level.
For the full year, the company expects net revenues to be in range of $2.6 billion to $2.65 billion and comparable sales to grow 1.5-2.5 per cent.
Saunders described the outlook as confident, which is “both a function of new store growth and a proposition that is aligned with prevailing market conditions”.
“This is pleasing as now that it is a public entity, the need to scale at pace will be more pressing. This will be both a complex and expensive endeavor and we believe that in a softer market the returns may take longer to come through. But, even so, there is a significant opportunity for Bob’s to become a bigger player in the home space,” he said.
