We expect Beacon Lightong's 1H17 result will likely be impacted by the following headwinds. 1) Soft like-for-like (LFL) sales growth due to Masters' aggressive clearance activity as it exits the market in late November. 2) A lower Gross Margin in response to the lower AUD/hedge rate and an inflated pcp. 3) Lower operating cost leverage on a more subdued LFL sales outcome. Tailwinds from the Masters closure should persist into FY18, a year where the store rollout is also likely to accelerate. Beacon Lighting (BLX) continues to boast a strong balance sheet, high ROE (>25%), industry-leading margins and strong cash flow generation. Our EPS forecasts fall by 6.8% in FY17, 6% in FY18 and 5.7% in FY19 on the back of lower like-for-like sales, Gross Margin and operating leverage assumptions. See the analyst’s note and rating here: (VIEW LINK)
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