With people putting off spending on DIY and furniture, is this the time to buy those shares?
The fall in residential property prices hasn't just hit the builders and estate agents, suppliers of furniture and DIY materials are also feeling the pinch. Fewer people moving house means less need for new furnishings and renovations, while less cash in people's pockets means that discretionary spending will be deferred.
ScS Upholstery was put into administration earlier this month, after embarking on an emergency sale in order to generate enough cash to pay the rent. Its trading arm has subsequently been sold off.
Rival sofa supplier Land Of Leather (LSE: LAN) has arguably fared better, in that its shares are still trading, and it successfully concluded a £15m rights offer and placing a couple of weeks ago. 'Better' is a relative term, though -- the shares have lost 99% of their value since January '07, and its current market capitalisation is only a whisker above the value of the funds just raised.
The company's financial year ends on Tuesday, and average analysts' forecasts are for earnings per share (EPS) of 30.78p, falling to 7.66p next year, although the most recent forecast was for a loss of 8p; shares are currently trading at 46p.
Topps Tiles (LSE: TPT) has also seen its share price slashed, albeit only by 82% from its high early last year. The company issued a positive outlook in May, and analysts' forecasts are holding up well -- EPS over 12p for the year to the end of September, falling to about 11p next year, accompanied by only a minor cut in dividends.
But to what extent do you trust these forecasts? With the shares trading at 55p, clearly the market is suspicious.
Shareholders in Carpetright (LSE: CPR) have seen a 50% fall in value. An attempt by the founder and chairman, Lord Harris of Peckham, to buy out the business last year failed, as he was unable to secure the funding. He recently described the climate as “challenging”, hardly a surprise to anyone, and added “next year will be one of the most difficult I have seen”. When one considers that he's been in the business for fifty years, that's quite a statement.
Taking advantage of the current weakness in Carpetright, Cascade Investments recently declared a 5.1% stake. Cascade is reportedly owned and controlled by Microsoft (NYSE: MSFT) boss Bill Gates. EPS is forecasted at 53p/share, putting the shares on a PE of about 12.
It's said that fortune favours the brave. This may prove to be a great opportunity, but certainly anyone touching these shares at the moment is braver than I am.
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