Land of Leather

Retailer Land of Leather has published its maiden annual results in line with forecasts and is seemingly expanding fast.

The group reckons it is the second largest retailer of leather sofas, with approximately 6.2% of the UK sofa market and 11% of the leather sofa market. Finance director Clive Hatchard believes LoL’s sofas are 30-40% cheaper than the competition, with 90% of products sourced form the Far East (up from 80% last time). He has no worries about leather falling out of favour as a sofa covering, as ‘we’re not about fashion, we sell to the mass market and families’.

LoL is looking to take advantage of the vacuum in the sofa space resulting from the exit of a number of furniture foes and the 8.6% growth in the leather sofa market (fabric sofas are growing at 5.6%). 12 new stores were opened in the year, giving a total of 72, and the store roll-out is accelerating at full pelt. Hatchard says four units have been opened in the last three weeks, six are due to open in the next fortnight and ten more are expected in the year to July 2007.

In the 12 months to April, LoL lifted pre-tax profits 6% to £11.3m on revenues raised 24% to £193.9m. Underlying like-for-like growth was around 4.5% and gross profit margin stood at 41.5%, up 150 basis points.

Broker Seymour Pierce forecasts 23.4p and 25.4p of earnings from £17.5m and £19m profits for the next two years. On those figures the shares trade on p/e ratios of 10.8 for 2007 and 9.9 for 2008. However, the shares have almost doubled in the last eight months or so. If you're sitting on healthy gains, take some profits.