QMG Insight Weekly Newsletter

1. MATTER OF FACT – W/C 25TH MAY 2015
25/05/2015 in Newsletters
1.Advance Auto Parts – misses EPS and Revenue forecast – still gains
2.Thomas Cook Group – Encouraging results
3.Cavco – Q415 Results
4.Nikon – impairment loss hampers positive view
5.Dairy Crest Group – under pressure
6.Marshalls says Jan-Apr revenue up
7.Topps Tiles – encouraging results
CONSUMER DISCRETIONARY
1. Advance Auto Parts – misses EPS and Revenue forecast – still gains
Source – Bloomberg
Company: Advance Auto Parts (AAP US)
QMG product view: US50.3 – Auto part retailers
Event: 1Q 15 Earnings
Highlights:
 AAP 1Q revenue a slight miss ($3.04b vs. cons $3.05b)
 Comp sales came in at 0.7% vs. 1.3% expectations

2.  FY15 EPS outlook cut (EPS $8.10-$8.30,down from $8.35-$8.55) as company struggles to
control costs associated with General Parts acquisition
QMGI comment:
Despite the miss and cut to FY15 forecasts, AAP closed +5% after a volatile trading day. QMG data
remains negative on US auto part retailers, with our most recent data highlighting weak top line
trends and margin compression. Analyst forecasts remain too high – risk remains to the
downside. Our preference remains Auto retailers (US50.1).
2. Thomas Cook Group – Encouraging results
Source – Bloomberg
Company: Thomas Cook Group PLC (TCG LN)
QMG product view: UK63.3 – Travel agencies
Event: 1H 15 Results
Highlights:
 1H rev. GBP2.74b vs. GBP3.01b yoy
 Pre-tax loss GBP303m vs. GBP366m yoy
 Underlying Gross Margin 21.3% vs. 21.7% yoy
 FY15 guidance maintained
QMGI comment:
1H numbers were broadly in line, with summer 2015 holiday bookings “encouraging” – especially
for the important Q4, offsetting weakness in Q3. We remain positive on UK travel agencies and
added this product group to our UK focus list in May. Our data highlights continued strength
across UK travel agencies, with sales growth of 11% yoy and margin expansion (+427bps).
3. Cavco – Q415 Results
Source – Bloomberg
Company: Cavco Industries (CVCO US)
QMG product view: US20.9 – Producers of wood buildings and mobile homes
Event: Q415 results
Highlights:
 Q4 15 Revenue: $141.2m (+7.7% yoy – cons $141m)
 FY15 Revenue: $556.7m (+6.2% yoy)
 FQ4 EPS: $0.66 (cons $0.52)
QMGI comment:

3. Our most recent data shows exceptionally strong volume growth and consistent pricing for US
producers of wood buildings/mobile homes. In addition, costs remain under control, leading to
margin expansion of +753bps. Product group continues to benefit from positive trends across the
US homebuilding industry – given the company is 100% US focused, our data provides unique
insight to sales and margin trends. We remain positive on this product group and see further
upside to consensus forecasts.
4. Nikon – impairment loss hampers positive view
Source – Bloomberg
Company: Nikon (7731 JT)
QMG product view: JA33.4 – Producers of optical instruments and photographic equipment
Event: FY14 Results
Highlights:
 Net profit came in sharply below consensus due to a ¥16.2 billion impairment loss related
to the exposure systems business
 Forecasts operating profit 30b yen vs. est. 49.8b yen for year ending March
 Operating profit target slashed for year ending March 2017 to 38b yen from 110b yen last
year
QMGI comment:
Nikon showed weak FY14 numbers and significant cuts to profit guidance. Our data remains
positive on the sector (due to positive pricing trends), and our initial impression is that FY15
guidance seems overly conservative – we will monitor this going forward.
CONSUMER STAPLES
5. Dairy Crest Group – under pressure
Source – Bloomberg
Company: Dairy Crest Group (DCG LN)
QMG product view: UK15.5 – Dairy processors
Event: Q415 Earnings
Highlights:
 Dairy profits dropped 90pc to £1.8m from £18.8m last year due to squeezed margins,
fierce competition and oversupply in the milk industry
 Pre-tax profits fell to £22.1m, from £54.2m in 2014
 DCG hit by falling sales by its key supermarket customers and a fall in milk prices
 DCG reiterated it expects proposed disposal of its Dairies activities will gain regulatory
approval, although may take another 6 months to clear
QMGI comment:

4. UK dairy processors remain one of least preferred product groups – we added DCG to our UK focus
list in December 2014. Our most recent data shows very weak price trends (-16.5%) for UK dairy
processors and we see similar trends across Producers of liquid milk (UK15.51/110) and
Producers of butter & dairy spreads (UK15.51/300).
MATERIALS
6. Marshalls says Jan-Apr revenue up
Source – Stock Market Wire
Company: MSLH
QMG product view: Producers of Building Blocks of Concrete & Artificial Stone – UK26.61/113
Event: Trading Statement update
Highlights:
 Revenue up +12% to GBP 127m (2013: GBP 113m) with strong order intake and sales
growth in all markets.
 Public sector sales (representative of 64% of Marshall total sales) up 17%.
QMGI comment:
QMG data for this product group is particularly positive (one of the highest rated groups in the
UK). Our data guided towards sales growth in the vicinity of +9% and continued margin
expansion of 399bps. This is on the back of strong revenue performance recently (+7.35% in
March) and continually good management of costs (-0.33%). Analysts are now expecting +10.6%
sales growth for Marshalls, slightly up from the 10.3% expectation prior to the trading statement
announcement.
7. Topps Tiles – encouraging results
Source – Bloomberg
Company: Topps Tiles (TPT LN)
QMG product view: UK26.3 – Producers of ceramic tiles
Event: 1H 15 Results – 19/05/15
Highlights:
o 1H Revenue: £104m (+6.4%)
o Adjusted profit before tax: £9.1 million (+13.8%)
o Like-for-like sales growth: +5.3%
QMGI comment:

5. An encouraging set of results from Topps Tiles (+10.4%), with the company reporting pre-tax
profit growth of +13.8% and 1H revenue +6.4%. Like-for-like sales rose 5.3%, however this was
considerably lower than the 10.2% growth reported the prior year. We highlighted recently that
QMG data remains positive on UK producers of ceramic tiles – another beneficiary of the buoyant
UK residential construction market, improving consumer confidence and higher disposable
income. With 30% market share and 100% of revenue derived from the UK market, QMG’s product
level data provides detailed insight into TPT’s sales and margins trends. Post 1H results, we still
see upside to consensus sales forecasts and margins.
UPCOMING RESULTS
Company: AutoZone (AZO US)
QMG product view: Auto Parts Retailers – US50.3
Event: 3Q FY15 Earnings – 26th
May 2015
QMGI comment:
We remain negative on this product group with negative sales and margin data observed in our
QMG data. There has been a slight improvement month on month in the QMG figures (Sales
current: -1.8%; Sales -1m: -3.4%, Margin current: -210bps; Margin -1m: -257bps) however it is not
enough to stem the divergent view against the street expecting +6.7% sales growth.
Company: SIGNET Group (SIG LN and SIG US)
QMG product view: Jewellery Retailers – 52.48_4: US and UK
Event: Q1 FY15 Earnings – 28th
May 2015
QMGI comment:
Our QMG product data is guiding towards more negative results than the street is expecting. The
market expects significant quarterly sales growth of +47% YoY however our numbers suggest
otherwise. 87% of sales come out of the US market and we see negative sales growth there of -
5.8%. In terms of our data that comes out of the UK, whilst guiding towards positive sales (+3%),
the region only represents 13% of overall group revenues.