Eobuwie Store Expansion And Efficiency Measures Will Improve Future Operations

Key Takeaways

• CCC is enhancing profitability by cutting costs, expanding into high-margin products, and targeting improved margins across segments.
  
• The company is boosting revenue growth through omnichannel expansion, a strong loyalty program, and operational efficiency improvements.
  
• Significant restructuring and cost-cutting efforts may disrupt operations, while brand integration and financial strategies could risk revenue growth and financial stability.

Catalysts

Operates in the footwear sector in Poland, Central and Eastern Europe, and Western Europe.

• CCC is focusing on improving its profitability by targeting a 20% EBITDA margin across the group, indicating stronger future earnings potential. By cutting costs, simplifying business models, and enhancing profitability in segments like Modivo, the company is set to improve net margins and earnings.
  
• The expansion into high-margin licensed brands and private labels, alongside the renegotiation of commercial terms, aims to improve gross margins to 63% by 2027. This will positively impact CCC's revenue growth and net profitability.
  
• CCC plans to enhance its omnichannel retail strategy by rapidly expanding its store footprint, including 70 new eobuwie stores by 2027, which will increase sales revenue. This expansion is supported by an expected PLN 1 billion in revenue from these brick-and-mortar stores.
  
• The integration of a strong loyalty program across its brands aims to drive customer retention and increase income per customer, potentially boosting CCC's topline revenue and overall financial performance through more significant cross-selling opportunities.
  
• Initiatives like the centralization of operational functions and automation in logistics, combined with strategic cost savings measures, are set to improve operational efficiency. This could lead to higher net margins and enhanced earnings in the future.

CCC Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming CCC's revenue will grow by 13.3% annually over the next 3 years.
• Analysts assume that profit margins will increase from 5.3% today to 9.1% in 3 years time.
• Analysts expect earnings to reach PLN 1.3 billion (and earnings per share of PLN 17.43) by about March 2028, up from PLN 532.8 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 14.3x on those 2028 earnings, down from 29.1x today. This future PE is greater than the current PE for the GB Specialty Retail industry at 12.1x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 11.08%, as per the Simply Wall St company report.

CCC Future Earnings Per Share Growth

Risks

• The company is undergoing significant restructuring efforts and is implementing cost-cutting measures across different segments, which might disrupt operations and impact revenue during the transition period.
  
• The integration of various brands and the creation of a single e-commerce platform may face execution risks, which could negatively affect earnings and operational synergy if not properly managed.
  
• The company plans to reduce inventory levels to a target of PLN 3 billion, which may affect short-term revenue if high-demand products are not adequately stocked due to inaccurate demand forecasting.
  
• The focus on expanding brands with higher price points and specialty products might alienate existing customers or fail to attract enough new ones, potentially impacting revenue growth.
  
• Financing the buyout of minority shareholders in Modivo SA through a rights offering and the issuance of warrants could hurt CCC's financial stability and net margins, especially if investor appetite does not match expectations.

Valuation

• The analysts have a consensus price target of PLN204.822 for CCC based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of PLN250.0, and the most bearish reporting a price target of just PLN119.4.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be PLN14.7 billion, earnings will come to PLN1.3 billion, and it would be trading on a PE ratio of 14.3x, assuming you use a discount rate of 11.1%.
• Given the current share price of PLN224.8, the analyst price target of PLN204.82 is 9.8% lower. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.